Keeping a business running is often a balance between managing day-to-day tasks and finding the cash to fund those tasks. Many businesses eventually need to look for financing to keep growth on track and cash flow smooth and steady. According to SunTrust Research, 17 percent of businesses plan to apply for a new business loan or line of credit to finance their growth goals in the next 5 years and another 19 percent plan to utilize an existing loan or line of credit to support their growth.
While access to credit is still high – 71 percent of businesses feel getting credit is easy - there are obstacles that business owners might face when applying for or receiving a loan. Some variables you can’t control, such as the availability of credit or the current state of the economy. The variables you can control – your business story, lender relationships and documentation – can be addressed with four steps that will make the process of getting a loan run more smoothly.
1. Start developing relationships before you need money
Relationships play a big part in financing decisions. You are the face of your business, and the driving force behind it. It will ultimately be your responsibility to deliver on the promise to pay and execute any plan, so the more your lender understands and trusts you and your business, the better your chances of success. If possible, try to build a positive track record with one lender.
2. Make sure your personal and business financials are complete and up-to-date
Even if a business is strong, poorly documented financial statements can cause a lender to lose confidence. Preparing and understanding both balance sheets and cash flow statements that support your plan are important to your success in obtaining credit.
3. Put your plan in writing
About half of small businesses positioned for growth create a written game plan to help meet their annual goals. Committing your plan to paper helps clearly articulate your business’s background, your current financial situation, exactly how you will use the funds you are requesting and how the capital can help your business grow. Be sure to also include forecasts of sales and expenses to demonstrate that you will have enough cash flow to easily make loan payments on time. If you have questions about your plan, or want expert advice, many organizations are available to assist business owners just like you. The Service Corps of Retired Executives (SCORE) offers experienced counselors who can help you test your business case, sharpen your growth forecast and clearly articulate your growth plan. Or, depending upon your ownership, a local Women’s Business Center or Veteran’s Business Outreach Center can also provide expert advice and knowledgeable guidance.
4. Asking for help shows your commitment
Getting capital on the best terms is serious business. Come at the process with a show of strength by getting the help you need to pull together the right paperwork, rather than leave your documentation to chance. Most loans require a great deal of paperwork, which can be time consuming to complete and hard to assemble. Relying on your banker, as more than one-third of all businesses do to help reduce financial stress, to assist you with the documentation of your loan will improve the likelihood of a positive outcome not to mention streamlining the process for you.