Six tips to make your small business more attractive to SBA lenders

Published on

People seek SBA-guaranteed loans to start or buy a business, buyout a partner, get working capital, extend a loan or get a lower down payment on an asset purchase. Whatever your reason, here are six tips to help make your small business more attractive to SBA lenders.

1. Educate your banker

Most bankers are generalists and know a little about many industries. Be sure to educate them so they are able to articulate the history of the business, the ownership, the industry, the loan request, business operations, etc. Make the banker your advocate in this process so they can make the bank confident in loaning you the money.

2. Show your cash flow

Banks analyze your business’s ability to repay the debt that has been requested. If the business cannot repay the debt based on past financial statements, are there projections with underlying assumptions that show your ability to repay in the near future? Are they reasonable and factual? Banks need to know that you can pay them back, so show them your plan.

3. Provide financial documentation

If you provide requested financial documents quickly, you will gain the trust of your banker. If they have to ask again and again, it’s thought that you don’t keep good financial records, which is a lender turn-off. It is also important that the business owner can be completely articulate in what the financial statements report. Having immediate and precise answers to the banker’s questions will impress and provide a high level of confidence.

4. Communicate your business model

Another way to impress your banker is to be able to communicate your business model. Be ready to answer questions like, how do you operate, how do you collect cash and pay customers?  What’s the typical timing of the operating cycle? How do you sell, and who do you sell to? Is there something atypical or proprietary in your operations? What are your short and long-term prospects?

5. Know how you will use the funds

Believe it or not, some businesses apply for credit and have no idea as to how they’re going to use the money. Do you need a line of credit for short term or is there a need for a longer term? How will it be used, payroll, inventory, lease payments? If the need is long term, what has to be paid immediately? Your banker may make suggestions, but if you can identify the use of funds initially, it will alleviate the concern while the request is reviewed.

6. Pull your personal credit

A bad personal credit score can sink any loan request. It is best to pull the personal credit score of all owners of the business and have it available for the banker’s initial review. Everyone should pull their own credit report annually to review for any inaccuracies or even fraud. If a business owner’s credit score needs help, it’s best to work through the issues before submitting a loan request to a bank. As in any job interview, a candidate has one good chance to make a positive impression. It is a similar case when applying for business credit. Attention to detail and consideration of the recommendations above can significantly improve the chances for a successful loan approval and the start of a long and mutually beneficial relationship with your banker.

You may also like

article

Do you have the six C’s of good credit?

Considering refinancing a loan? Or borrowing money to pay for a big expense? With interest rates still low, and more financial institutions willing to lend, this may be the right time to consider accessing capital.

It’s also a great time to…

article

Savings vs. CD accounts: Which should I choose?

Unsure if you should put your money into a Savings account or if a CD is a better option? A savings account offers you more flexibility and access to your funds, but a CD will probably provide you with a greater return. The answer mostly likely…

article

With these assets and liabilities, I thee wed

7 Key Questions to Ask Before Getting Married

Joining your lives together means joining your financial lives, too. You see one future with many goals. But each of you comes to a marriage with different spending habits, different attitudes…

General Disclosures

The opinions and views in this blog post are those of the authors, and are not intended to provide specific advice or recommendations for any individual. Please consult professional advisors with regard to your individual situation.

Credit Disclosures

All loans and lines of credit are subject to credit approval.