“According to a survey by Arthur Anderson Enterprise Group (www.anderson.com) among businesses with up to 19 employees that got (startup) funding, the sources were: 68% bank business loans, 22% leasing, 16% vendor credit, 12% credit cards, 9% private lenders, 6% personal bank loans, 3% private stock sale, 2% venture capital and 9% other.”
Good news! Those are a whole lot of options to explore, and it’s worth noting that big banks aren’t the only game in town. So, even though it isn’t necessarily easy to obtain the money you need for your small business opportunity venture, you shouldn’t give up too soon. Know that by following some simple steps, you can dramatically increase the likelihood of finding the lender and loan terms that are just right for your needs.
Moving on from my last post which focused on documentation requirements…
The next step is an obvious one and you will do well to prepare yourself for this particular hurdle that any lending institution will force you to face: Can you pay them back?
The bottom line is that it’s your responsibility to assure them you can. All of the preparations you go through in creating your loan presentation is tailored to this challenge. You must persuade the lender to give you a loan. And this is successfully achieved through a carefully delivered presentation.
“(How you go about) recommending your proposal to the loan officer and the loan committee is essential. If you don't believe in it, no one else will. Your recommendation may be brief. Recap all of the strong features of the deal and state that granting your loan is prudent.”**
In other words, you need to believe in what you’re doing and convey that passion with conviction. The loan presentation is your “make or break” moment, so make the most of it!
You’re an entrepreneur after all, so you’re inherently a bit of a risk taker. Look at your presentation as the gamble of a lifetime, one you can’t afford to lose. You can appreciate a good risk/benefit analysis, right? Banks and lenders are in the business of calculated risk, just like you are. They deal with that very equation all day long. Their job is to choose individuals who offer them the strongest likelihood of realizing a return on their money. So, look at things from their perspective. Ask yourself, “Am I a good risk?” Really think about it. Many don’t, and they end up paying for it. They don’t get the money they need and are shocked when things don’t go their way. If you think you are a good risk, get ready to defend yourself. Be steadfast in your conviction and back it up with hard facts.
As mentioned in Part 1, it’s critical that you convey a clear sense of what you plan to do with the money you receive. How and when do you plan to spend it? And how about why and with what goals in mind? What are the potential returns on the investment you will make? How reasonable are they, and in what timeframe? If you can effectively answer these kinds of questions, there’s an increased likelihood that you’ll get to the next step in the lending process.
The final step in the process often involves what kind of collateral you have to “secure” the loan. Most lenders want something more than just your good word and a firm handshake. Unfortunately, even a strong business plan with every single “t” crossed and “i” dotted can’t always make up for a lack of collateral.
Collateral refers to the tangible assets that you are willing to put up to secure the loan. These can be things such as a car, boat or property which are fully owned by you. If you have a car, but are continuing to make payments, don’t even consider tossing it in as collateral because that’s just not good enough.
An additional plus is showing that you are personally willing to invest in the business, even if it is at a fraction of the money you seek from the lender. No matter the amount, it shows the prospective lender that you're committed to your own enterprise.
Experience also goes a long way with many lenders to help close the deal. If you’ve had previous success in any business, paint a clearer picture of your business acumen. Be well prepared to talk about yourself in great detail.
So there you go…Small Business Loan Guidance 101. Hope it helped. Remember, preparation is everything! Your chances of getting the loan you need improve greatly if you do two key things: 1) have your document ducks in a row, and 2) alleviate any concerns the lender might have about loaning you what you need.
Carpe Diem My Friends!
**As cited online at www.tenonline.org/sref/jc1.html Article title: “How to Make a Winning Loan Proposal (A Business Plan Designed for Getting a Loan Approved)”
