Securing a Loan in Today’s Lending Environment

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Do you own a business or dream to start one? If so, you will likely need a loan now or in the future. The process of securing a loan for your business can feel very intimidating. Regulation looms over today’s lending environment. The good news is that there are many resources out there to help make the process easier to manage. Banks want to lend you money; they just have to do so within their highly regulated environment. Here’s how to navigate that environment.

Utilize the Small Business Administration
The Small Business Administration (SBA) is an excellent starting point, and its website, sba.gov, offers a great deal of information. “I believe the SBA is an exceptional tool for business owners across the country. It makes a lot of sense if the business owner becomes familiar with the resources the SBA offers. Then they can find an SBA lender and meet with them,” says Eric J. Whitford, a VP of Commercial Services at Midwest BankCentre, in St. Louis. Whitford called attention to two links in particular.

The business guide link (sba.gov/business-guide) breaks down the steps of owning a business from planning to launching, then ongoing management, and finally, how to grow an existing business. The guide is user-friendly, and breaks down each topic so you can focus on one step at a time, making it seem more manageable. Under “Plan your business,” there is a section titled, “Write your business plan.” Having a business plan is a critical piece in the process of securing lending. In the planning section, there is also a section on how to “Fund your business.” This section starts with determining how much funding you’ll need, and then lists several potential options you could pursue for your business needs. If your business has been operating for a while and you need more funding, be sure to check out the “Grow your Business” section that includes information on how to get more funding. That portion goes over how to prepare and where to go to get the needed funding.

The loan program link (sba.gov/partners/lenders/7a-loan-program/types-7a-loans) directs you to a listing of SBA loans called 7(a) loans. This is the SBA’s primary program for providing financial assistance to small businesses. The terms and conditions, like the guaranty percentage and loan amount, may vary by the type of loan. Each loan type and its terms are listed in an easy-to-follow format that makes it possible to compare them quickly. Some of the terms include the maximum amount you can borrow under the program, the interest rates, eligibility decisions, SBA turnaround time, forms required, and who makes the credit decision.

Pointers from a lender
Whitford pointed out several things that would help a business owner when they feel ready to contact a lender:

  • Have an idea as to how much money you will need.
    • Why that amount?
    • How will you pay it back?
    • If repayment relies on increased revenue, come prepared with projections and data supporting the assumptions.
  • Bring the most recent three years of financial statements for the business, including projections, if necessary.
  • Be ready to explain the current status of the business and any headwinds that may be a factor in the future.
  • Plan ahead and allow time for the process. You don’t want to be reliant on the bank/lending source to keep your doors open. It is easier to obtain financing when times are good as opposed to needing the loan to stay in business. A line of credit is always good to have, even if you don’t need it at this time.
  • Be patient and don’t get frustrated if the lender is asking a lot of questions. Their job is to identify the risks associated with the loan, and their decision is ultimately affected by the answers and information you provide, and the manner in which you provide it.
  • Relationships are critical. Make it known to your lender that you are looking for a long-term partner and not just a quick loan. Don’t lead with the rate discussion.

Whitford acknowledges that the topic of securing lending is broad. Each organization is different. At any given point in time, organizations will be at different stages in their business cycle, have differing needs for funding, and varying degrees of financial leverage. Utilize the SBA and other resources including developing a relationship with a lender you can trust to go to bat for you and your business. Lenders want to lend you money. They want to partner with you. Treat that relationship with respect, continue to work hard in your business, and you should find lending success.

Bree Urech-Boyle is Chief Financial Officer at the National Wood Flooring Association in St. Louis. She can be reached at bree.urech-boyle@nwfa.org.

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