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Tips on Getting a Small Business Loan
during the Recession
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Getting a loan for your small business is really difficult - even harder than normal - these days. In part, this is due to bank closures and tightening credit requirements.
However, with proper preparation and a smart business plan, you can still get a loan for your business. Entrepreneur's Start Up magazine talked to several loan officers at banks to get these tips on securing your loan:
Have a solid business plan. This may mean having an accountant help you with projections. Many business loan officers like to see three different projections: the expected scenario, a conservative scenario, and an aggressive scenario. In addition, you should be able to discuss contingency plans in case things don't go well. See a business plan outline.
Market yourself and your business. Prepare for your loan meeting even more than you would for an important sales meeting. You should be able to explain why your business is superior to the competition, what makes you reliable and responsible, and why you are deserving of this loan. Rehearse your value proposition statement. Be prepared and show confidence in your business and yourself! Keep your presentation to about 20 minutes and don't get too technical in your language.
Bring your documents. You should bring with you copies of financial data for the business, statements and tax returns for the individual owners of the business and collateral documentation. (For many small businesses, this might be mortgage statements from the business owners' home.)
Go after SBA-backed loans. Loans backed by the Small Business Administration, a federal government agency, may be easier to obtain. Although a stimulus package that increased SBA-backed loans expired in November 2009, many loan officers think the SBA will be able to reallocate stimulus funds to increase lending again soon. Get information on SBA loans.
Take advantage of previous relationships. Go to a bank you already have a relationship with. For example, if you were the CFO of a company and that company had a good banking relationship, then go to that bank. Working with a bank that knows you can make the process easier.
Show commitment. Many loan officers are interested in seeing that you (and your family) are truly committed to your business goals and dreams both financially and emotionally.
Adapted from "The Truth (About Loans) is Out There," Entrepreneur's Start-Up magazine.
Related articles from ThinkBusiness Money:
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