Lessons on lending

Information on what your business loan needs should be and which lenders to approach.

Money, money everywhere, but not a dime to spare. It sure can feel that way if you are looking for a loan to start or grow your business. Yet money is out there--lenders made more than $437 billion in small business loans as recently as 2000.

What can you do to improve your company's chances of being served a little slice of this big pie? First, be prepared. This means that you should be able to speak competently about your company and the industry in which you compete. You should be comfortable rattling off key financial figures, both actual and projected, without hesitation and with a true understanding of what those numbers mean. Knowing what your business does or how your product works is not enough.

Your personal knowledge needs to be backed by a complete and polished set of documents. This includes a realistic business plan, financial statements and projections that the lenders can review when evaluating your application. To convey a positive impression about you and your business, these documents should be clearly and logically organized and written.

Extend your preparation to your personal finances as well. Lenders will often conduct a personal credit check to help determine whether to make a loan. You should have a solid personal credit history. Take the time to review your credit report to confirm the information is correct. Having a good credit record can help ensure that you get the loan you want.

Second, take the time to target which lenders you pitch for a loan. Targeting does not simply mean identifying your closest local banks. No matter how knowledgeable you are, you are unlikely to secure a loan if you request a loan from a lender that does not traditionally make small business loans.

Screening potential lending sources is a critical part of the loan process. Before you ask for a loan, you should do your homework. Look for a lending institution, whether it be a bank or financial service, which has a strong track record in small business lending. Understand the type of business that they typically like to work with, the average loan size, and the type of loan that they prefer making (e.g. equipment lease).

If you find you do not have the time to screen your options, a commercial loan broker can help you sort through your in- and out-of-state options. Brokers have already-established relationships that they can recommend you try approaching. They should also be able to help prepare your presentation and documents.

Still having difficulty securing a loan? Then consider a SBA loan. With a SBA loan, the government guarantees the payment of the loan. This can make lending institutions extend a loan to your company where it might otherwise reluctantly do so. Although some additional red tape may be involved, the good news is that can help you come up with some green cash.

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