Small Business Loans: Putting Your Best Foot Forward

Remember the book called "Catch 22"? It is now commonplace to call a "Damned if you do, and damned if you don't" situation a "Catch 22". This is a predicament that many small business owners have found themselves in. Running short of cash, the owner goes to the bank to borrow money, only to find that they don't qualify for a loan because they don't have enough money. This is quite maddening to the business owner who laments, "If I had enough money, I wouldn't be asking for the blankety-blank loan!"

Seems kind of stupid, but you have to understand what bankers are up against. Number one, they have to have some assurance that they are going to be repaid. They have to sell this loan to the "loan committee" of the bank, and they are not about to present a package that will make them look foolish. Furthermore, they have auditors who look very closely to make sure the loans were issued according to bank policies and procedures. If a loan officer has too many loans that "go south," then his/her track record starts to affect his/her career.

This is why you find many loan officers who go strictly "by the book." These people refuse to look at any extenuating circumstances that might indicate that you would be a "good risk" regardless. Unless you fit into their narrow criteria of "risk" you might as well forget it. It is best to find a bank manager or loan officer who has plenty of self-confidence, is familiar with how small businesses operate, and is willing to look at the big picture. They can sense whether a loan applicant is solid or shaky. This is the point at which you, the applicant, will want to put your best foot forward.

You may find that as long as you have substantial equity in a home, good credit, and adequate cash flow, you are a tasty morsel in the mouth of a loan officer. However, if you are short in any of these areas, you are going to have to overcome the banker's natural skepticism.

First impressions are paramount. If you are not organized, you are dead meat. If you are asking to borrow money, then you must possess the skills necessary to pay the money back. These are skills, such as, the ability to think and plan ahead and the discipline required to operate your business in a professional manner. This means having the know-how to gather information and organize it in such a way that you can make meaningful and timely decisions. Ask any banker and they will tell you of countless business customers that come in seeking a loan who don't even know what a financial statement is. There are many other business customers who seek loans that do have a financial statement but haven't a clue as to what it means. This does not bode well for first impressions.