Ensuring your business is well positioned for financing involves more than just completing paperwork; it requires strategic planning, transparency and a clear understanding of your objectives.

Whether you’re seeking funds for growth, working capital or new ventures, the key to getting a business loan lies in being proactive. Here’s how to get ready — before you meet with a banker.

Diversify Your Revenue Streams for Financial Stability

Lenders are more inclined to finance businesses that demonstrate resilience and stability. One of the clearest signs of a financially sound business is diversified revenue streams. A company that relies heavily on a single source of revenue is vulnerable to industry shifts, market downturns or unexpected events. Diversifying into new markets, products or customers hedges your risk and ensures that a decline in one area won’t severely impact your entire business.

A 2022 study by McKinsey and Company found that companies with diversified revenue sources are better positioned to adapt to market changes and maintain consistent cash flow.

Maintain Transparent and Up-to-Date Financial Records 

Accurate financial documentation is critical when seeking financing. Lenders will request a variety of financial records — including your balance sheets, income statements and cash flow statements — to assess your company’s financial health.

One mistake many businesses make is waiting until they need financing to organize their financial records. By keeping your records current year-round, you not only make the loan process smoother but also gain a clearer picture of your business’s performance. This allows you to make strategic decisions earlier, minimizing the likelihood of last-minute financial surprises.

In addition, projections such as cash flow forecasts or growth estimates can help paint a comprehensive picture for lenders. Projections demonstrate that you are forward-thinking and have considered how getting a loan will impact your business’s future.

Streamline Operations for Maximum Efficiency

How efficient are your operations?  That is another factor lenders evaluate when determining loan eligibility. They want to know the business is being managed effectively and can sustain growth without burning through capital. Optimizing your operations boosts your profitability and sends a message to lenders that you are a prudent business leader.

This could involve investing in new technology to automate processes, cutting down on unnecessary expenses or reevaluating vendor contracts. The goal is to show that your company is running at maximum efficiency, allowing you to leverage any additional capital to drive business growth rather than plugging operational gaps.

Develop a Succession Plan and Long-Term Growth Strategy

Business continuity and long-term sustainability are key concerns for lenders. Having a solid succession plan in place, especially for family-owned or closely held businesses, shows that you are preparing for the future. Succession planning isn’t just about replacing leadership in times of crisis; it’s about ensuring the business continues to thrive long after the current management is gone.

A well-structured succession plan demonstrates that your business is more than a one-person show and has the organizational depth to continue successfully. This reduces the perceived risk for lenders who may be concerned about the company’s stability in the absence of key figures.

Additionally, a comprehensive growth strategy is critical when preparing for a business loan. Lenders want to see that you have clear, actionable plans for scaling your business. Whether you’re looking to expand into new markets, increase production capacity or acquire another company, a growth plan shows you’ve thought about how to use financing effectively to drive long-term success. 

Understand Your Borrowing Needs and Loan Options

Before applying for financing, it’s essential to know precisely how much capital you need and what it will be used for. Lenders respond more favorably to an owner who clearly articulates borrowing needs and knows how the funds will be allocated.

This means evaluating your business’s future financial needs. Will you need working capital for operations, funds to purchase equipment or a loan to finance expansion into a new market? Each of these purposes may require different types of loans, so understanding your needs in advance will help you choose the right loan product and present a stronger case to lenders.

Build a Strong Relationship With Your Lender

Lending decisions are not solely based on numbers. Relationship building plays a significant role. Developing a strong relationship and encouraging open communication with your lender early in the process allows you to better understand the loan requirements and gives lenders confidence in your ability to manage your business.

Whether through regular financial reviews, updates on business performance or discussions about long-term goals, these interactions can make a significant difference in securing loan approvals.

To foster such relationships, Banc of California provides dedicated Relationship Managers who are experts in various industries, from aerospace to consumer products to manufacturing and more. They will offer personalized advice you can count on.

Work With Banc of California for Your Financing Needs

At Banc of California, we understand that every business is unique, and so are its financing needs. Our relationship-focused approach means we take the time to understand your business, your goals and how we can best support your success. Whether you’re looking to expand, improve your cash flow or invest in new ventures, our comprehensive suite of commercial banking solutions is designed to help you thrive.

For businesses seeking specialized financing, such as acquisitions or equipment loans, Banc of California offers a range of options designed to meet the diverse needs of startups, small businesses and middle-market companies.

With a proven track record of supporting key industries — manufacturing, healthcare, industrial and food and beverage — we bring extensive expertise and deep resources to help you secure the financing you need. Learn more about how Banc of California can support your business on our Commercial and Business Banking page.