Your Guide to Securing a Business Loan in West Virginia

Starting or expanding a business often requires a crucial ingredient: funding. As we discussed in our previous post about how to fund a new business, writing a business plan is the first step, but it’s also necessary for obtaining most types of business loans.

Look at the many small businesses across West Virginia that found success by seeking guidance with the help of organizations like the West Virginia Small Business Development Center (WV SBDC). Similarly, JSB strives to be the best bank for business loans in West Virginia and wants to help business owners secure the funding they need to thrive.

In this blog post, we guide you through the process of securing a business loan in West Virginia. From assessing your business needs to navigating the business loan application process and what to do to get things moving, we want our communities to thrive.

Understanding Your Business Needs

It's that age-old question, "Where do you see yourself in five years?" but in this case, the question is, "Where do you want your business to be in five years?" Answering this question requires understanding your strengths and weaknesses and why you want a business loan in West Virginia. You can also consider it laying the foundation for a successful loan application and, ultimately, a successful business.

Evaluate Your Strengths and Weaknesses

Every business has its unique strengths and weaknesses. Identifying these is crucial in determining how a loan can best support your growth and address your specific needs.

Questions to ask yourself to help identify your strengths: What is your business good at? What are your competitive advantages? Do you have a unique product, a loyal customer base, or a highly skilled team?

Questions to ask yourself to help identify your weaknesses: Where are the areas for improvement? What challenges or obstacles is your business facing? Is your business struggling with cash flow, have outdated equipment, or lack resources for marketing expertise?

After your assessment, you can determine how a business loan can be used strategically to maximize your strengths and overcome your weaknesses.

Define Purpose

Once you have a clear picture of where you see your business in five years, you will have the clarity to help you communicate your funding needs to commercial lenders like JSB. Common reasons why business owners seek funding:

Starting a new business
Expanding operations
Developing new products or services
Refinancing existing debt
Covering working capital needs

Clearly articulating the purpose of the loan demonstrates to West Virginia commercial lenders that you have a well-thought-out plan for how the funds will be used and how they will contribute to your business's success.

Keep Your Business Plan Fluid

Now that you have identified your business's purpose, it's important to regularly review and update your business plan. A fluid business plan demonstrates adaptability and responsiveness as a business owner, increasing the chances of commercial lenders in West Virginia approving your loan.

Business Loan Options in West Virginia

With various business loan options available in West Virginia, it's important to understand business loan type options, their pros and cons, and what types of businesses are best suited for different situations.

JSB Business Loans

Traditional banks, like JSB, offer a range of business loans tailored to various business needs. The most common types of small business loans are:

Term Loans are lump-sum loans with a fixed repayment schedule and interest rate. They're often used for larger investments like equipment purchases or commercial real estate.

Pros: Predictable payments with competitive interest rates.
Cons: Can be challenging to qualify for and may require collateral.
Best for: Established businesses with a strong credit history and a specific, large-scale need.

Lines of Credit provide access to a revolving credit line business owners can draw from as needed. They help manage cash flow and cover short-term expenses.

Pros: Flexibility, access to funds as needed, and only paying interest on the amount borrowed.
Cons: Higher interest rates than term loans, which can be risky if not managed carefully.
Best for: Businesses with fluctuating cash flow, short-term funding needs, or unexpected expenses.

Alternative Lenders

Beyond traditional banks, alternative lenders have become increasingly popular in recent years. Still, it's important to understand the trade-offs before choosing this route, unlike community banks like JSB, which prioritize building strong relationships with our clients. Common types of alternative lenders are:

Online lenders offer a streamlined online application process and faster approval times, which can appeal to businesses needing fast funding.

Pros: Quick and easy application process, typically with faster funding.
Cons: Higher interest rates, less flexible repayment terms, and limited personalized service.
Best for: Businesses needing immediate access to capital or those that may not qualify for traditional loans.

Fintech companies leverage technology to offer innovative financing solutions, such as merchant cash advances or invoice factoring.

Pros: Can provide funding for businesses with poor credit and flexible repayment options.
Cons: Can be expensive and may require giving up a percentage of future revenue.
Best for: Businesses with poor credit or those seeking short-term, flexible funding.

Crowdfunding platforms allow businesses to raise funds from a large number of individuals.

Pros: Can be a good option for startups or businesses with a strong community following.
Cons: Requires a successful campaign, which can be time-consuming and there’s limited financial guidance.
Best for: Businesses with a compelling story and a strong online presence.

Preparing Your Business Loan Application

At JSB, we believe in building strong relationships with our clients, starting with a thorough and well-prepared loan application. Our experienced commercial lenders are here to guide you every step of the way. Here is an overview of the required documents and valuable tips on effectively presenting them, which increase your chances of qualifying for a business loan in West Virginia.

Essential Documents

A complete and well-organized loan application package is crucial for demonstrating your business's creditworthiness and potential for success. Here are the key documents you'll need to provide:

Business plan: As discussed earlier in this blog post, your business plan is the roadmap to your success. It should outline your business goals, strategies, and financial projections.
Financial statements: These provide a snapshot of your business's financial health, including your balance sheet, income statement, and cash flow statement. Current financials are essential for demonstrating your ability to manage finances and repay the loan.
Tax returns: The ability for lenders to verify your income and assess your financial stability will come from tax returns from the past few years.
Bank statements: Recent bank statements provide insights into your cash flow and transaction history, helping to assess your financial habits and stability.
Personal financial statement: This document provides an overview of your personal assets, liabilities, and net worth. It's often required for business owners who are personally guaranteeing the loan.
Credit report: Your personal and business credit reports provide a snapshot of your credit history and creditworthiness. A strong credit score can significantly increase your chances of loan approval and secure favorable terms.
Legal documents: Depending on your business structure and the type of loan, you may need to provide legal documents such as your business license, articles of incorporation, or a partnership agreement.

The Business Loan Review Process

JSB has built strong customer relationships since 1869 because of our trustworthiness and transparency. Once your business loan application is submitted, our experienced commercial lenders begin to evaluate for risk and opportunity associated with the loan request. Let’s review the key factors that influence lending decisions.

Creditworthiness measures your ability to manage debt responsibly. Your personal and business credit history plays a significant role in our assessment.
Financial performance over a period of time assesses not only your business’s profitability but cash flow and overall financial health.
The Industry and market in which your business operates and the economic conditions are considered.
Management experience and business management expertise are crucial factors in our loan review process.
Collateral could be required to secure the loan depending on the loan type and amount. This could include business assets, real estate, or personal guarantees.
Loan purpose and whether the funds will be used to support a sound business purpose is an important consideration.

Common Reasons for Business Loan Rejection

We want to help you navigate the loan review process and avoid common pitfalls that lead to rejection, so to help, here are key factors that can influence lending decisions:

Poor credit history
Weak financials
Insufficient collateral
Lack of experience
Unclear business plan
Industry or market concerns
Incomplete application

Remember, relationships are a two-way street. We may contact you for additional information and clarification throughout the loan review process. Promptly responding demonstrates your commitment and helps us make an informed decision.

At the Closing Table

The final step in securing a business loan in West Virginia is signing loan documents at the closing table, so before you sign on the dotted line, it's important to review and understand the terms of your loan agreement carefully. This includes:

Interest rate is the rate that will accrue on your loan balance.
Fees associated with the loan, like origination fees, closing costs, or late payment fees.
Repayment schedule is the frequency and amount of your loan payments and the total repayment period.
Covenants refer to any conditions or restrictions you must adhere to as a borrower, like maintaining certain financial ratios or providing regular financial reports.

The best banks for business loans, like JSB, will clearly explain all the terms and conditions to you. You should always work with a bank that encourages you to ask questions.

Receiving Your Funds

After you’ve signed all the loan documents, you will typically receive your funds within a few business days. That’s when you can start working toward executing your business plan. Whether your loan funds were for expanding your facilities, purchasing new equipment, or hiring additional staff, use your funds responsibly and track your progress.

Beyond Your Loan Payments

Actively managing your loan payments helps maintain good credit and avoid fees and penalties that increase the overall cost of your loan. Responsible repayment fosters trust with your lender, which can be beneficial if you need to adjust loan terms or want additional financing in the future.

Your business will grow and evolve, so maintaining a strong relationship with your lender, like JSB, will prove to be an asset for your business. An annual business review with your JSB commercial lender is one way to do this. Here’s why these reviews are important for you:

Gain expert financial advice from experienced lenders, which helps you make informed decisions about your business's finances, investments, and growth strategies.
Identify areas for improvement with objective insights from your lender as they help identify opportunities for optimization.
Access to resources and support, such as networking opportunities, educational programs, or specialized consultants.
Strengthening the relationship with your lender is beneficial when navigating challenges or seeking additional financing.
Improved financial management is often realized through the review process as it encourages you to maintain accurate financial records.
Increased confidence knowing your lender is actively involved and supports your business in achieving your goals.

Secure a Business Loan with JSB

JSB wants to partner in your success. Committed to Jefferson County and all of West Virginia communities, our business lending team is always available to assist with assessing your needs, exploring loan options, and helping prepare your loan application. We pride ourselves on a quick response that results from local loan approval.