Small Business Loan Preparation

Have you been considering or been looking into applying for a business loan? It may be what you need to get your business off the ground, but be forewarned that it isn't a simple process. A business loan from the SBA or a women or minority-owned business loan may seem like the way to go based on information you may have seen on the Internet. However, when it comes to meeting with the banks, it isn't that easy.

Statistics show that 80% of all businesses fail within the the first 3 years. Therefore, many financial institutions require 3 years of business records before even looking at you for a loan. Makes it kind of hard to get a business "start-up" loan doesn't it?

There are also many acquisitions and mergers going on in the financial world. This can take the loan decision making process away from the local branch, where you may actually do your banking, and move it to the major or corporate offices. A place where you are just a number or a name.

If you add these things up, it makes it harder to get a business loan these days. In order to get a loan now, you really have to impress the bankers.

Here is some advice on making your business loan application more attractive to those making the final decisions. It will require some time and effort on your part, but it will be well worth it.

Provide your banker with the following initial information:

• A brief summary of your loan request. Include your business plan, with management team and short-term and long-term financial projections.
• Credit histories for all principal partners in your business.
• A short dissertation addressing how much money you will need. How you plan to use it. How you plan to pay the loan back.
• Contact information for each of the principle members. This will allow the bank to contact you with any questions and also set-up an appointment for further discussion.

If your initial presentation to the bank has impressed the bankers enough and they have agreed to set-up a meeting to discuss a loan, then congratulations. You have made it past the first initial hurdle in getting your loan. It is now time to prepare for your face to face meeting with the bankers. This meeting can be very intimidating. So, the better prepared you are, the more professional you will appear. It will also make the meeting easier and much more effective .

You will need the following for your face to face with the bank:

• Three years of personal tax returns for all principle members of your company
• Credit reports for all principle members of your company
• A detailed business plan, including capitalization
• A plan to address any credit issues that may exist on any of the business principles credit reports. You want to squelch any concerns the bank may have about any credit issues.
• A proposed future cash flow plan with a running bank account balance. Include the loan payment for the proposed loan as an item in this plan. Including the payment shows the bank that you hold repayment as a priority item.
• Identify any collateral or personal assets that may be used to secure the loan or a portion of the loan.

So, as you can see, just because you are starting a minority or a woman-owned business your loan application is not a simple process. No matter who you are, you have to do your homework and prepare when applying for a small business loan. It may seem like a lot of work, but starting a business requires work. The process may seem scary, and it can be very intimidating. But with faith in your business, preparation and determination, you can secure a loan for your business. Don't be afraid to try, you have nothing to lose by trying.

To your success...