Small business owners who’ve made it through the Great Recession have already proved their worth to lenders. That real-world success is very attractive. While credit is still tight, the recently enacted Small Business Jobs Act of 2010 should boost small business lending, with enhancements to two Small Business Administration loan programs, 7(a) and 504, and a $30 billion lending fund that will make cheap capital available to banks. While getting a loan is still challenging, borrowers can increase their chances for success by choosing the right lending partner and presenting themselves in the best possible light.
1. Choose an SBA-approved lender. SBA loans are typically easier to get and more flexible than conventional bank loans. They usually offer lower down payment requirements, longer loan terms, and lower monthly payments. If an SBA loan is the best option, choose an SBA-approved lender. The application and approval process is SBA-specific and having a lender with deep experience can save borrowers time, money, and aggravation.
It’s also helpful if your lender has strong networks with other professionals such as attorneys, accountants, and builders. Having these networks in place can further streamline the process.
2. Bolster your application. A winning application has two main components: a great story about the business and its future, and a comprehensive financial presentation.
The story should include a cogent business plan that spells out industry trends, your niche, and performance relative to the competition. Be honest. Lenders understand how difficult the past few years have been. Focus on how you solved problems and overcame obstacles. Equally important, check your personal credit and be proactive about explaining any soft spots.
For financial documentation, don’t even think about shoebox accounting. Your documents, including financial and tax records, should be comprehensive and well-organized. Also, be prepared to put up all available collateral, including personal property.
While credit may ease up somewhat in the coming months, the lending climate is still tenuous. To maximize your chances of getting a loan, pick the right partner and create a compelling case that lays out your qualifications and your dream—backed by a concrete strategy—for business success.
CIT Small Business Lending Corp.
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