The loan underwriting process is becoming more demanding for small businesses, and it's essential for any start-up or those wishing to expand to be diligent in knowing all the ins and outs of getting a loan. Heading into 2011, there are some expert tips that can give any small company an advantage in the lending market. Here are the top six suggestions from industry professionals for getting access to the cash you need to fund your small business.
1. Offer Something of Value
The days of getting something for nothing are gone, making it necessary for loan applicants to have a significant source of collateral before they secure a loan. Helena Hauk, a business consultant who was recently named the SBA FinancialServices Champion for her role in facilitating over $20 million in SBA loans in 2010, emphasizes the importance of having it for those who are applying for working capital, inventory, or equipment. She also adds, "Be prepared to have a second lien taken on rental property, for example." Hefty loans will not likely be offered to those with few assets and no real property to secure against.
2. Keep Meticulous Records
The one-page loan application is almost unheard of in today's economy, causing borrowers to come to the table with piles of qualifying information before their loan will be considered. If you haven't made hard copies of those items most likely to be required, it's best to have them ready before you're asked. In addition to the business application, personal financials and tax returns are commonly requested, shares Helena.
3. Plan on Providing a Plan
Another useful tool for convincing a lender that their dollars are safe with you is a no-nonsense business plan. "Include all the details relevant to telling the story of how the business will operate, who will operate it and what experience the owners/managers have," Helena advises, "as well as relevant and conservative projections." This is one area where you don't want to skimp.
4. Character Counts
In addition to the numbers that will be crunched during the application process, a lender will also be making a note of the personal impression you make. "The lender decides subjectively whether or not you are sufficiently trustworthy to repay the loan or generate a return on funds invested in your company," reveals Denise Beeson, a small business loan officer and consultant. In addition to educational background, business and industry experience and quality of your references, the background and experience of your employees may also be considered.
For the remaining tips, read the entire article here.