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How to actually approach a bank or other entity about a small business loan

I've got my business plan done (no working prototype) and am seeking funding to get an app/web platform built.

To get started on a small business loan, do I call the bank? Go in and ask to talk to someone? Just use lending tree?

What are the actual physical steps that need to be taken to get your business plan in front of a lender?

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6 answers

Establish a relationship with the bank first by opening an account to show that you will be the client. You can start managing your account well and that can help secure meeting with a Banker.

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Ndzavi Derrick gives excellent advice on a starting point. When seeking a bank with which to establish the account he mentions, I suggest you check the background of bank and its involvement in Small Business Administration (SBA) Loans.

If a bank has strengths in SBA loan processing, then you have a higher probability of becoming financed by applying through them for a loan.

The SBA does not loan money directly, but applying for a loan with a bank that works with the SBA on finance guarantees, reduces the risk of the bank substantially in providing your loan if the SBA approves your application.

The SBA assumes a large portion of the guarantee in approved application loans.

Report Kenneth's answer

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Given the fact that you are seeking a loan with no working prototype for your online sports related platform, I would suggest you hold off on pursuing a bank loan. In my opinion, you are too early. You have yet to complete testing with a user group and get to final design. You also have yet to prove your concept – can you capture paid users and generate revenues? You want to be fully ready to launch with a solid user base ready to subscribe and pay for your online sports app. It looks like you are too early to take on debt at this time given where you are in the development life cycle; especially given the high risk with trying to monetize this type of business model.

Report Matt's answer

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Thanks for all the insight!

Matt, I appreciate your advice. There is one other player in my niche (although we have substantially different products and user experiences) that has recently raised $10 Million in Series A, with what appears to be a pretty small user base. Does that count in any way as a proof of concept or would make my pitch, at my current stage of development, less risky to a bank? Even if you still advise that I'm too early in the process, just trying to get a feel of how I would be assessed going forward.

Thanks again!

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I think it does help your pitch if you have a “comparable” that investors or the bank can reference back to. I would suggest you compile a table that does a direct comparison between the two apps. What is the estimated size of the user base? How is the app monetized? What features or functions distinguishes your app vs. the other app. What plans do you have to expand the user base? For example, baseball is popular in Japan. Do you have plans to release a Japanese version? It helps to communicate future planned growth when trying to secure financing.

If you still want to pursue a bank loan, I still think you need a “harder” proof of concept. It’s the same question that always gets asked on Shark Tank: What are your sales? Until you have paying subscribers for the app, you are still in conceptual stage. This makes it difficult for a software app to secure a bank loan. You certainly can have a conversation with a bank and see what they think. But I would keep your options open since banks have become more risk adverse given COVID-19.

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