The Small Business Owner’s Guide to Getting a Loan

Growing a business takes money. And at some point, that means sitting down with a lender. Maybe it’s time to expand, or you need equipment, inventory, or working capital to get to the next level.

Wherever you are in that process, knowing what lenders are looking for can make all the difference in getting your loan approved. And whether you need financing now or you’re planning ahead, the best time to start getting ready is often well before you think you need to.

Justin Delgado, EVP and Chief Lending Officer at First Utah Bank, has spent years helping small businesses navigate the entire lending process. We asked him to walk through the basics of building a foundation that can help any company succeed in securing a loan.

1. Bank Somewhere That Can Grow With You

Every business needs a bank from day one—for deposits, cash management, and the day-to-day mechanics of running a company. What many business owners don’t realize is that where you choose to bank can influence your financing needs later on.

“You should start with a bank that serves your current needs, but you’ll want to consider your future needs as well,” says Delgado. “Will that bank work with you on a loan one, two, or five years down the road?”

Before opening a business account, it’s worth taking the time to ask a simple question: Does this bank work with businesses like mine, and can they take me where I want to go? By establishing deposit history with the right bank, you’re laying the groundwork for a productive lending experience later on.

2. Keep Clean, Explainable Records

Lenders want to understand your business and your trajectory, and your financial records are the primary way they do that. The more clear and organized they are, the more confidence a lender will have that you’ll be able to pay back your loan.

If you’re thinking about borrowing for your business, it’s wise to get your books in order well ahead of time. If you don’t already have one in place, a fractional CFO can be a smart investment depending on the size of your business. A CFO speaks the bank’s language, keeps your financial records organized, and can provide context for anything that needs explaining.

“Once you can’t explain part of your finances, you lose validity,” Delgado says. “A good CFO can act as a helpful intermediary between you and the bank.”

3. Have a Clear Operating Agreement

If your business has more than one owner, a well-written operating agreement tells lenders everything they need to know about how your company is structured, and who has authority to make financial decisions.

“An operating agreement shows us that your business is thought through and well-organized,” Delgado says.

An operating agreement defines who can enter into debt on behalf of the company, how decisions get made, and how ownership is structured. For a bank, that clarity matters. And for your business, it’s a foundational document that protects all parties regardless of what happens down the road. An attorney-reviewed operating agreement is worth having right from the start.

4. Understand Personal Guarantees

Personal guarantees are a standard part of small business lending, and understanding the reasoning behind them helps the process go much faster.

Many business owners are accustomed to separating themselves from their business on paper as much as possible, like keeping their business and personal expenses separate, for example. But when it comes to guaranteeing a loan, lenders require collateral and personal guarantees that are directly tied to the person running the business.

“The owner has the power to make all the decisions,” Delgado explains. “The bank doesn’t want to divorce that from the machine that brings in all of the income.”

Think of it like insurance. The bank can’t finance a loan if it’s unsure if you can repay it. “Collateral is the bank’s insurance policy, or the final method for getting our money back if something unexpected happens.”

5. Know the Worth of Your Collateral

Collateral comes in many forms, and lenders weigh each type differently based on how easily it can be converted to cash if needed. Real estate, heavy equipment, and other fixed assets carry the most weight. Inventory and accounts receivable are also considered, though their value to a lender largely depends on their liquidity.

“The type of collateral really matters,” Delgado says. “A piece of unprocessed steel has a lot more potential buyers than a finished specialty product.”

Knowing what you have is crucial, and being realistic about what it represents to a lender helps set expectations early and keeps the application process moving. Your banker can walk you through how different assets factor into a loan structure.

6. Keep a Healthy Balance Sheet

Revenue and net income are important, but lenders also want to look at your company’s full financial picture. A healthy balance sheet carries a lot of weight.

“That is probably the number one predictor for us on how things are going to go,” Delgado says.

Leverage ratios, liquidity, outstanding obligations; these numbers tell a lender how stable your business is and how much runway it has. A business with strong cash holdings and manageable debt is in a fundamentally different position than one carrying significant obligations against the same revenue.

How long can your current liquidity sustain your business if revenue slowed? Lenders think about these kinds of things, and business owners who have answers at the ready tend to look more attractive.

7. Start the Conversation Early

There’s no such thing as too early when it comes to talking to your banker about future financing needs. They can help you prepare and know what to expect.

“As soon as you can think of a realistic timeframe for the need, go to your bank and talk to them about it,” Delgado says. “The larger and more complicated the loan, the sooner you should be having those conversations.”

If you’re thinking of a loan in one or two years, an early conversation lets your banker tell you exactly what to be building toward. Smaller, simpler loans don’t require the same leg work, but for significant financing, that preparation really pays off.

8. Consider a Community Bank

When you’re shopping for a loan, rate matters. But so does the kind of bank you’re working with.
At a large national bank, you may cycle through two or three relationship managers over five years, and the people you meet often don’t have much pull over decisions that affect your business. At a community bank, you’re more likely to work with the same people over a longer span of time, and they have more direct authority. If you need to talk to a decision maker, you can get to one.

“Ninety-nine days out of 100 you don’t need to have a close relationship with your bank. But it’s always that one day when something happens that you need them—and that’s when the value of a community bank kicks in.”

When you work with a local institution like First Utah Bank, the loan decisions are also made locally, by people who understand the regional market and want to see it grow. That perspective and proximity is something you simply can’t get from a larger bank thousands of miles away.

Getting Your Ducks in a Row

Strong loan applications all share a common theme: they reflect businesses that are well-managed, well-documented, and have taken the time to build a relationship with a bank that works with their industry.

“At the end of the day, you want to show that you’ve built something worth investing in,” says Delgado. “The difference between a smooth lending experience and a frustrating one typically comes down to preparation.”

If you’re ready to talk about financing, or you’re looking for more information about the best path for your business, our lending team is happy to help. Contact First Utah Bank to start the conversation.