My business and partner and I are in the process of starting a new meal preparation business. We are going to our local bank this week to request a loan, but we aren't even sure what we should be requesting. We know that we need $158K to start up the business and to cover working capital for the first year when we don't expect to turn a profit. My partner and I can put in $40K between the two of us, so we are looking for loans totaling $118K. We'd like to get $75K in a short term loan and the other $45K in the form of a credit line. We have our business plan done and all of our projected financial information complete and audited by an accountant. We are a little bit concerned about getting the loan because my partner's credit score is only 530 - even though she and her husband have great financial success now and have built up a net worth of about $300K. I on the other hand have a credit score of 750, but my net worth is only about $160K. Would we be better off requesting separate loans or should we request a joint business loan? What do you think our chances are of even getting a loan? Should we be going to the SBA before we hit the banks up or should we just go straight to our local bank? We aren't really sure what to expect from our meeting with the bank beyond their request for our business plan, personal financial statements and three years of tax statements. I know this business can be successful, but we really need to borrow some money to get started. Any suggestions or tips for our upcoming meeting?

When applying for a loan the credit and financial strength of all partners is considered. I don't know of any banks who would lend to someone with a credit score of only 530. You would have a better chance applying for a loan as an individual if that is possible. Depending on where your assets lie they should be sufficient for an SBA backed loan. The lender would not allow the other person to be listed as a partner unless his credit is taken into consideration.

Before visiting the bank, look for a Small Business Development Center in your area, usualy located at a local university. Also go to www.score.org. Both offer free advice and consultation on securing financing for business ventures.

As far as your chances, there is no way to tell without having reviewed the entire business plan and loan request.

One item to note. You say that you have a combined net worth of $460k. Why is it that you are only willing to put in $40k? The total amount needed is well below your net worth and it would seem that you could self finance the business. Remeber, if a lender does not feel that you are willing to put your financial neck on the line, then neither will they. This is especially true when you are seeking a loan that is not secured by real estate.

Thank you for responding so quickly.
The reason we are not self-funding the business is because the majority of both my partner and I's money is tied up in either retirement funds or our houses, so we are unable to get it out. We may have to consider other financing though based on your response.
You suggested getting and individual loan since my partner's credit is bad. Do you think a bank would be willing to give me a loan even though I would be an equal partner in the business?
I will be looking into SCORE and the SBDC in my area - thank you for the tips on that.

"Do you think a bank would be willing to give me a loan even though I would be an equal partner in the business? "

No, a bank offering SBA financing for a business will require that all partners (owning 20% or more of the total stock) provide personal guarantees and credit qualify. With a 530 score, your partner will not qualify and any business he is associated with will be turned by banks, the SBA and SBA lenders.

Equity in homes and some retirement accounts are accessible for business ventures. Consult with your accountant and the administrator of the retirement accounts.