The Buzz with Martha Foulon-Tonat, Executive Vice President and Chief Lending Officer, EagleBank
EagleBank is a commercial bank founded in 1998 by a group of local bankers and businessmen to provide superior service local businesses, professionals and real estate entrepreneurs of the general Washington DC metropolitan area. We have 13 branches, with a 14th just about to open. 5 of our branches are in DC, one in Northern Virginia and rest in Montgomery County. We currently have $1.5 billion in assets.
Given the current economy, obtaining loans for any purpose has become difficult, but not impossible. In your opinion, what are best strategies for first time small business loan applicants in obtaining a small business loan?
Small Business applicants should have a complete and concise business plan which demonstrates why they can be successful. Specifically, the business plan should demonstrate:
1) The ability to repay the loan supported by historical financials and/or projections. If it is a start up or expansion loan, the projections should be presented on an expected case, a worse case and a best case basis;
2) The management expertise in their industry – if the principals do not have direct experience in the industry an explanation on why they think they can be successful; and;
3) What is being offered as secondary and tertiary sources of repayment (i.e. collateral and personal guarantees).
As an experienced lender, what are the top five mistakes you have seen entrepreneurs make when applying for a small business loan?
1) No business plan
2) No equity or inadequate equity from the principals
3) No proposed secondary source of repayment
4) Assuming that business loans are structured and priced similarly to a home mortgage loan
5) Not understanding how much debt they actually need for working capital
For businesses that have been declined, what recommendations would you give on better preparing for gaining approval the next time around?
Focus on developing and honing the business plan. It is the single most important tool in getting your business financed. It should outline the strategy for your business, define your marketing plan, describe your financial projections, and outline your working capital needs.
Secondly, get to know the small business lending process. Understand your capacity to repay your loan, how much money you may need and the terms and conditions of business loans vs. home mortgage loans.
Lastly, come prepared. Have all the information you need to make the lending process easier on yourself and your potential lender.