How-to guide to securing a small business loan in today's marketplace
Securing credit can be a major problem for small business owners. However, you can win half the battle simply by learning what lenders look for in potential borrowers of small business credit.
First, look for lenders with whom you have an established relationship. If you are new to the world of crediting, contact a lawyer or accountant to present your proposal to a bank.
Typically, lenders prefer doing business with clients whose funds will be used to purchase fixed assets, such as land or equipment. This allows the bank to have collateral to secure the debt, one of the three C’s of credit. The other two, character (a check on your financial status and credit history) and capacity (cash flow of the business), are also considered when banks look at your potential as a borrower.1
The next step in requesting a loan is preparing your business plan. The business plan is a packet about your business that markets its ability to pay back debt and become profitable. This includes details such as a company overview, market analysis, operations, marketing plan, funds required, and financial statements and projections. In addition to the three C’s, banks will look at numerous financial statements to decide whether or not to grant your business a loan. These include the business’ balance sheet, profit and loss statement, and statement of cash flows. 2
Businesses with poor credit history, inexperienced management, insufficient collateral or a poorly documented business plan will likely have difficulty obtaining its desired loan. By smoothing over rough ends in the business plan and credit history, it will become much easier to secure the loan your business needs.
1 http://www.ded.state.mo.us/business/businesscenter/financingyourbusiness.shtml
2 http://www.ny.frb.org/pihome/addpub/credit.html
*See the online credit card application for details about terms and conditions of offer. Reasonable efforts are made to maintain accurate information. However all credit card information is presented without warranty. When you click on the "Apply Here" button you can review the credit card terms and conditions on 's web site.