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What Banks Look at When Financing Small Businesses

Updated: Apr 12, 2020

Welcome to our very first Community Workshop Recap blog! is dedicated to your growth, and your business well-being. With that stated, we hope our blog series will help you grow along with us in our social entrepreneurship journey. Join us, as we share some key takeaways that we obtained from a community workshop that we attended. We’ll also share upcoming workshops that are happening in the community on our platform; Just visit our local events area to see them and how to register. Last week we attended The 5Cs of Credit: Procuring Small Business Capital. This workshop was presented by TD Bank, in partnership with the Scale Up Miami, a small business program offered at The Idea Center at Miami Dade College. Let's get right into it…

Local banks can be a huge resource for small businesses everywhere. However, not too many small businesses are able to take full advantage of the resources that are available to them. This is specifically true when it comes to exploring financing options or products for your small business. A lot of times, small business owners or social entrepreneurs just don’t have enough information or fully understand the core components that make them financially fit for some of the financial resources they want. At this workshop, Shenique Nagelbush and Emily Arcia, who are both relationship managers at TD Bank, covered what banks look at when financing a small business (or social entrepreneur). This may not be the universal guidelines since all banks aren’t the same. However, if you plan on approaching a bank to help finance your business or social venture in some way; Do know that they will most likely evaluate your character, capacity, collateral, capital, conditions. Let’s take a closer look…


Hmm...can you play the part? Sorry, we’re not auditioning for a movie role here. But can you play the part of being a great borrower in real life? The answer to that question will determine if most banks or lenders will want to be your friend. To help shape your character, banks may analyze your integrity by taking a closer look at your past credit history. This information could be found on your business and personal credit reports. So, you’ll want to be sure to know what’s on your credit reports even before going to the bank. Such reports can suggest whether or not you can be trusted to pay your loans back on time...or if you’re likely to pay them back at all. If a bank gives you access to $100, will you carelessly spend $125? Since most banks probably don’t know all of the details of your financial or professional history; They will rely on those reports to make assumptions on your character and the type of borrower you can be.


Before you go on a long trip, do you check your gas gauge? Assuming it works properly, yes right? If not, you should. You may want to be sure there’s enough gas in the tank to get you where you’re going, and you’ll have enough money to get more gas if needed. So, in a similar fashion, since your bank will be going on this social entrepreneurial ride with you...they will want to be sure that you and your company will have the ability to pay back new and existing loans. What will be your primary source of repayment? How does your business make money? Do you have cash flow? Is your business profitable, or is projected to be profitable? All of those are factors that are taken into consideration to help measure your capacity, and may also help determine how much money you may have access to. To help you better understand some of these factors and/or to communicate them effectively; connect with an accountant or finance professional.


Most of us may carry a wallet or a purse (which may be our own, or our partner’s during a bathroom break...haha). However, that doesn’t always mean that most of our money or valuables are in it. While banks may not care about how much money you put in your wallet, they may care to know how much money you’ve invested in your business or how much of it you own (equity). In other words, do you have skin in the game? They may also want to know your Debt-to-net worth ratio: Do you own more than 50% of your business? This is even more critical for start-ups.


Nice shoes...are those the new and expensive MKs? Size 10 right?...hmm. Ok, banks probably don’t want your shoes or consider them assets. However, they will want to know about your other assets such as real estate, business equipment, inventory (if you have a product business or if appropriate), savings accounts or Certificate of Deposit. All of those mentioned, among others, may be considered collateral or a secondary source of repayment; In case your primary source of repayment fails and you’re not able to pay them back. Your collateral can then be liquidated to help the bank recover some or all of the money that you borrowed. As the model client that I am sure you are to your bank; I assume you will hold on to your collaterals… and your shoes!


Are you familiar with a SWOT Analysis? If not, that’s ok. Google and this blog are here for you. This is a very powerful and yet useful framework that will help you analyze your business’ strengths, weaknesses, opportunities, and potential threats you may face in the marketplace. This framework can help you minimize your business’ weaknesses while maximizing your strengths and taking advantage of the opportunities that are available to you. This tool may help the bank by giving them a better view to analyze your business. This includes the bank’s understanding of you and your business’s ability to adapt to change and the ability to recover from a catastrophe.

Now that you know what banks will look for, I hope you’re reading this early enough to make any adjustments if needed. Also, do not be intimidated or discouraged if everything isn’t up to par. After attending this workshop, I felt much better about my relationship with banks. Even if you’re not looking for financing right away, it may be a good idea to start a healthy relationship with your banker. I also learned that as business professionals and entrepreneurs, it’s important, to be honest about your current situations and some of your future plans as you grow your banking relationship. Many banks will help you understand the process of financing a business or obtaining a credit line, as well as how to improve on certain areas if needed.

These are our takeaways from The 5Cs of Credit Workshop, presented by TD Bank, at the Idea Center at Miami Dade College. Feel free to share this, if you think someone else will find it valuable, let’s help each other secure the bag! Stay tuned, for our next CWRS!

Notes from the author: Emmanuel is a creator who's passionate about social entrepreneurship and community building. He is a seasoned entrepreneur with 15+ years of business and professional experience. Over the years, he's valued the opportunity to do business and learn from various industries such as banking, sales, marketing, real estate, and management. You may connect with him by clicking here.

For upcoming workshops and events, check out our community events page by clicking here.

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