A Guide To Loans

Proper preparation and knowing the correct answers to the most common banking questions often determines whether a bank will grant a loan. The best way to prepare is to be ready to answer all objections. This section covers five of the most common reasons that a bank rejects a loan, followed by some suggestions on how a salon owner may turn a denial into an approval.

The Business Plan

There are a number of key steps a prospective salon owner can take to ensure that a loan officer is properly informed. First and foremost, prepare a business plan. The plan may only be a few pages; however, the key is that it’s well thought out. Having a business plan available shows a loan officer that you have credibility as an owner and also that you put time and effort into the project, and you’re not just rushing into a business you are unaware of.

Additionally, be prepared to supply business credit references and a personal credit history. An applicant must have a proven track record in repaying distributors and suppliers. The most important factor is that all personal obligations including mortgages, car loans, student loans and credit cards are made in a timely manner. If an applicant has a history of slow payment, an exceptional explanation, in writing, will be required or the loan request will be immediately denied. Good personal and business credit policies are the key to success.

Finally, a brief description of the indoor tanning industry also might be helpful. Remember, most bankers are not aware of how successful the indoor tanning industry actually is. The description should include how the industry has grown into a multibillion-dollar profession. A bank has to feel confident that the industry is professional and has the potential for growth. In the past, individuals who have not run their business on a professional level have tarnished the reputation of the indoor tanning industry; however, the industry has come a long way over the past decade. Educating a bank shows that you have done your homework, which in turn, may put a bank at ease. This alone could turn a no decision into a yes decision.

Your Needs—Be Specific

When a loan officer asks how much money you need to borrow, don’t reply with an answer such as, "How much will you lend me?"

While preparing for a bank loan, perform an in-depth analysis of your borrowing needs no matter if you’re starting a new business or remodeling or expanding an existing one.

The first step is to meet with a local equipment distributor to find out the cost of the equipment that you want to install in your salon. After this step is complete, a contractor should be able to offer an estimate as to how much renovations and construction will cost. In addition, by using a business plan, it should give you an idea of how much operating capital is needed to open and run the business throughout the first couple of months. All this information is needed when you apply for a loan.