A Small Business Loan Isn't an Impossible Dream:
5 Ways to Impress Lenders and Get the Funding Your Business Needs

Maybe you're starting a new business and seeking funding from acquaintances or from a local credit union that is willing to risk lending money to startup businesses. Or you're proud owner of an established business seeking expansion funding from a large, national bank. Either way, you will need to impress your lender in order to get a loan from them.

Contrary to the popular images of the greedy, mean-spirited banker who gets a kick out of denying you the money that you need (think about the banker on Deal or No Deal!), most commercial lenders are happy, even overjoyed, to make loans: that's what they're in business to do. The only problem is that they can't find enough people and businesses that they feel comfortable lending money to.

Here's how to help your lender feel comfortable with you, so that you can get the funding that your business needs.

1. Be Credit Worthy-- More than anything, your lender is interested in being as sure as they can that you will pay back their loan. In order to be able to project whether you are likely to pay them back, they will look at your credit history. Like it or not, your lender will look at your credit report and may use it to help them learn a lot about your personality as well as your financial responsibility.

By looking at the number and types of loans you have taken, what they were for, the amounts of the loans in relation to your income and whether or not you paid them back early, on time, late, or not at all, your bank will try to infer whether or not you will repay your debt to them, and whether you will do so on time.

If you feel that your credit report doesn't tell the whole story about your reliability, don't despair: include strong character references from respected people who know you well in your loan application. For instance, a letter from your pastor, a former boss, or teacher that describes how reliable you are, what a high level of honesty and integrity you display and how seriously you take your assignments or responsibilities will reassure your lender somewhat if you do happen to have a spotty credit report.

2. Have Training and Experience That Will Help You Run Your Business-- If you are looking for money to expand your successful business, then you have already proven that you have what it takes to run that business well. If you are still trying to get your business off the ground, your lender will want to know that you have the experience and skills that will help you do so. Be able to prove that you have the technical skills to run the business that you envision or that you can hire and manage people who do.

If you have little or no experience in your dream business' industry and lack advanced managerial skills, you should probably look at getting a job in your chosen field instead of starting a business in it. Once you have some relevant experience under your belt, you will have gained lots of new insights into how you would like your own business to run (you may have also decided that that particular industry doesn't appeal to you anymore!).

3. Write a Great Loan Proposal-- A loan proposal describes your business and the credentials of you and your management team. It also contains detailed financial projections for your business and states the purpose of the loan you are requesting. Last but not least, your plan presents the terms of the financing and repayment plans that you would like.

Each lending institution is likely to prefer a specific format for your Loan Proposal. Be sure to ask them what that format is, and tailor your report to their specifications. This will give them all the information that they need in the way that is easiest for them to process it.

4. Have a Clear and Realistic Picture of Your Business' Financial Needs--Many entrepreneurs don't really understand what kind of financing they need, who to get it from, or how much it will actually cost them to borrow money. Do your homework, and decide what type of loan you are looking for (i.e. equity or debt financing), how long you will need to borrow the money for and how much it will cost you to borrow it. Will you be able to pay the loan back if your business fails? How? Your potential lenders are very interested in the answer to that question and others like it. Have a detailed, realistic answer for them.

5. Present Yourself Well-- In other words, earn your banker's trust and respect. Your banker isn't making a loan to your financial statement: he's making a loan to you as an individual. If your banker feels that you are an honest, hardworking person with a strong commitment to your business, it will truly increase your chances of getting a loan (neat, clean clothes and a fresh haircut don't hurt either!). Your banker's respect for you can also lead to reduced loan processing times, smaller fees and, most importantly, introductions to other local businesspeople who can become suppliers, customers and mentors to you.

Just keep in mind that you and your lender are partners, not adversaries. This will make the process of getting your small business loan by feel a lot more pleasant than it otherwise would have, increase your chances of securing a loan and may even help you make some important new contacts. If you have a viable business plan, get out there and sell it: you may have heard that it's impossible to get a small business loan, but now that you know how to put a smile on your lender's face, you can forget the rumors and go get your loan!

~ Tammy Biondi