If your small business needs a capital infusion, turning to your bank is a logical option. Even so, your bank is not the only place you should look nor will you be guaranteed a loan based simply on your current business relationship. You have a number of different options for discovering or obtaining funding including the following four methods:
1. Local news stories.
Your local newspaper, blogs and other media outlets can provide a significant amount of information about area small businesses and how they receive funding. Look for stories where capital infusion is part of the narrative especially where the owner cites his funding source.
In the stories, you may soon detect a pattern where one or more commercial banks assist small businesses. Contact these banks to learn if a loan might be extended to you. Build a relationship with bankers to keep them apprised of what you do.
2. Business associates and friends.
The people you know in business and personally are logical sources for talking to them about their lending experience. Your small business networking group such as Business Networking International may have one or more people who have successfully closed a loan.
These individuals can share their experience and could provide a referral to a lender that might work with you. Never underestimate the power of networking.
3. Make friends with other lenders.
You should know your current banker, a professional who is aware of your needs. Don’t stop there: meet with other bankers even if they are not currently in a position to lend you money.
You may be able to secure a loan from one lender now and a different lender in the future. Maintai a contact list of people you can call on for referrals.
4. Contact the SBA.
The Small Business Administration (SBA) does very little lending. Instead, it works with economic development agencies (EDAs) on the state and local level to guide small businesses. EDAs provide start up advice, training and resources and can help with business location and site selection.
You can also receive assistance with employee recruitment and training. Perhaps most important is that EDAs also provide financial assistance with grants, loans and tax-exempt bonds. Explore your options and choose the path that is right for you.
Loan Decision-Making Considerations
With a banker listening to your request you must make a case for your loan request. Lenders want individuals who have business experience and the ability to repay the loan. Your business credit history will also be reviewed including financial statements. Where business information is lacking, your personal information may be sufficient.
Banks also want collateral, what can help secure the loan. Collateral can include business equipment, property and financial assets. An alternative repayment source such as stocks, bonds and commercial property may also be considered. You will also need to submit a business plan and project your revenue and expenses over the coming months, perhaps years.
The more information you can provide about your business, the better for your borrowing cause. Large banks actively lend to small businesses, but community banks should also be considered.