Four Steps to Improve Your Chances of Getting a Loan
Share current LOB: smallbusiness
Like many small business owners, you might have trouble getting a loan for a myriad of reasons. Unfortunately, some variables, such as credit availability and economic climate, are out of your control. But four simple steps can improve your chances of getting a loan.
1. Build relationships with potential lenders before you need money.
Relationships play a big part in financing decisions because you are ultimately the one who has to deliver on the promise to pay and execute the plan. The more your lender understands you and your business, the better your chances of success.
Building a track record is a key component in improving your chances of getting a loan. For example, consider a contractor with an established track record in construction who needs to reposition her business into the highgrowth solar power market. She needs capital to invest in training and equipment. Since her bank worked with her successfully in the past, it was able to issue her a Small Business Administration loan, even though this was a new venture with no specific operating history.
2. Produce a clearly written plan for capital investment.
Explain your business, how the capital will help it grow and how exactly you will use the capital. Work with an experienced Service Corps of Retired Executives or SCORE counselor who can help you test your business case, sharpen your growth forecast and clearly articulate your growth plan. Putting your plan to paper will strengthen your clarity when presenting the plan to others.
Include forecasts of sales and expenses to show you will have enough cash flow to easily make the loan payments.
3. Prepare a complete, accurate set of business and personal financials.
A strong business with poorly documented financial statements might not look so strong to a lender. Most owners do not have financial backgrounds, so you should work with your accountant or small business advisor to understand and prepare both balance sheets and cash flow statements that support your plan. Prepare these documents in advance, rather than lose the confidence of your potential lender or investor.
4. Don’t leave documentation to chance.
Most loans require a great deal of paperwork, which can be time consuming and hard to assemble. If you are serious about getting capital on the best terms, it is smart to get the help you need to pull together the right paperwork, rather than leave things to chance. Work with a banker who will assist you with documentation of your loan and streamline the process for you.
About SunTrust Business Owner Research:
SunTrust surveys small business owners and advisors as part of its ongoing business seminars and symposiums. The small business owners attending these events include both SunTrust client and non-client business owners and are representative of the broad spectrum of businesses located in the SunTrust markets. The research cited in this report is extracted from these 5,425 small business owner surveys collected between 2007 and 2011.
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.