Tips for a successful loan application

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(FORTUNE Small Business) -- Dear FSB: Our Internet hosting firm is in its second year of operation, and trying to establish bank credit. I've read that a DUNS number is a good place to start, but what is it? What else do banks look at when evaluating loan applications?

- Frederick Selby, Owner
On Point PDS
Lake Worth, Fla.

Dear Frederick: A DUNS number would indeed be a good place to start.

It's a nine-digit identification number assigned by credit-rating company Dun & Bradstreet (DNB) that lets banks and other potential lenders see a snapshot of your company's bill-paying history and general financial stability. To apply for one, go to D&B's website and, under Customer Resources, click on "Get a DUNS Number."

Beyond that, when applying for a bank loan it's crucial to have a pristine personal credit history - especially with a firm as young as yours, says Rebecca Macieira-Kaufmann, head of small-business lending at Wells Fargo (WFC, Fortune 500) Bank in San Francisco. Since you will be the guarantor of any loan a bank extends to your business, a loan officer will scrutinize your credit record.

"People who don't honor their personal commitments generally don't honor business commitments either," Macieira-Kaufmann notes.

Your planned use for the loan will also be a factor - banks want to see a business purpose likely to boost revenues. They are also impressed if you've invested a significant sum of your own money in the business. It shows you have a stake in its success.

When it comes to your repayment ability, Macieira-Kaufman says, a bank checks out your firm's cash flow and profitability. Macieira-Kaufman notes that the issue of collateral "doesn't really come into play with small business loans, which are usually unsecured."

But, she adds, in service businesses like yours with few material assets, banks do sometimes consider accounts receivable to be a form of collateral.

"We also look at your geographic location and how the economy is doing there, your industry and whether it's growing, and your deposit balances," Macieira-Kaufman adds. "And it always helps to have your business account at the bank you hope to borrow from."