Credit News

Axiomatic fact: Banks are in business to make money - not give it away. We all know this. So does this place your chances of landing a loan for your small business between poor and none? Absolutely not. Small business loans to people like you can provide much of the financial backbone banks need to deal with large corporations.

However, a little preparation on your part can really make the difference. Here are four tips that may go a long way to securing the financing you need.

Whether your business plans consist of primetime real estate downtown with dozens of employees, or they only include you and your spouse running the small coffee shop you've both always wanted, you need to communicate everything as fully, and succinctly, as possible.

Don't make your loan officer guess your intentions. In the case of the coffee shop, sure, you plan to sell coffee. That's pretty much a given, but you need to share more. Who are your target customers? How much foot traffic can you expect? Where are your nearest competitors? How will you differentiate your business from them?

Answering any questions the bank would like to hear before they're asked can go a long way to getting the loan approval you want.

According to the U.S Small Business Administration, over 50% of small businesses fail within the first year and 95% fail within five*. Those aren't good odds and you can bet that your loan officer knows this.

Help mitigate the bank's risk by showing why you won't default on the loan. Bring all of your financial statements from the past five years. Demonstrate that you pay your bills on time. Being proactive here can show you have nothing to hide.

Establishing a good working relationship with a small business credit card company may help, too.

Investors look to the future, wondering how much return on investment they'll see in one, three and five years. Banks will concentrate on your ability to repay the amount borrowed.

Both have their pros and cons. If your business starts earning millions, it would be better for you if a large percentage didn't go into any co-owners' pockets. On the other hand, some investors may be able to leverage connections they have to drive more business your way. After all, it's helping them, too. An impersonal bank is unlikely to be this magnanimous.

Either way, you're forming a business relationship from the onset. Deciding which one is right for you may help ensure your success.

Remember what you've always heard: You only get one chance to make a first impression. Cliché or not, it would behoove you to review your business plan with a trusted friend, someone who isn't involved and can provide honest feedback.

If this person is unclear on any of your objectives, you can be sure your loan officer (or investor, should you go that route) will need clarification, too. By being prepared, you can speak with the calm reassurance businesspeople like to hear.

If banks only lent money to companies that were unquestionably "sure-fire hits," they would soon be out of business themselves. It's all a judgment call on their part.

By following these four tips, you can help keep the financial ball in your court at all times and better your chances for securing the capital you need.

(*Source: www.sba.gov)