It is no secret that small business lending has taken a beating. Economic setbacks and frozen credit from banks has made small business lending quite a challenge. According to a 2011 SBA report, the total value of small business loans in 2008 was $712 billion and in 2010 was around $652 billion—a big drop effecting many. The good news is that through government initiatives, like the Small Business Jobs Act, lending abilities have opened up. The Small Business Jobs Act also raised the guaranty against default to 90%, which is 10% greater than it used to be. They also raised the maximum loan amount to $5 million. This means that if a small business does not pay their loan, then the government guaranties to pay the bank back 90% of the outstanding balance. This allows banks the benefit and motivates them to lend to small businesses and also entices small business owners to actually apply for the loan.
In Capital One Bank’s 2011 survey, 85% of United States’ small business owners said they were able to get the financing they needed. Make sure you do your homework and study what banks are more flexible and have history with lending to small businesses in the current times. While large banks have more capital, sometimes smaller banks can have a more personal connection and fewer hoops to jump through for approval. Also beware of banks that can string you along and then at the end do not approve the loan, with possibly no intention of doing so in the first place.
There are many thinks you will need to have ready to secure a small business loan. This includes:
– A sound business plan
– Cash flow and income projections
– Your personal financial statement
– Your credit report
– Past tax returns, both personal and business if you have them
After you have all the documents in order you need to get a small business loan, you now you need to persuade a lender to believe in you and your business. The financial institutions are still skeptical and you want to make the right first impression. Put yourself in the lenders shoes. What would you want to see and hear that would make you feel secure in lending someone money. You would want to know how they will pay you back. You will also want to know how they will have enough income to pay their operating costs, supply their own income AND pay their loan.
Be knowledgeable about your documents, your circumstances and your business. No matter how objective a loan office may be, everyone is affected by a professional, prepared and confident presentation. Look and act like a business owner. Be personable and courteous and most of all, be prepared to sell it! Your accountant is one of the key players in your preparation for this event. Gary and his team of associates at Numerico PC are experts at knowing the best way to apply for business loans. They will help you to establish where you are, where you want to be, and best of all, how you will get there!
