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Do Your Homework Before Applying For SBA Loan

July 31, 2011 | Small Business Loans

Excerpted from story published in Los Angeles Times 7/25/11, written by Cyndia Zwahlen

Barbara Gerovac serves up one of the offerings at Anaheim Brewery. She and her husband, Greg, had to rewrite their business plan several times before they received a $470,000 SBA loan. (Don Bartletti, Los Angeles Times / July 25, 2011)

So, what’s the best way to get a small-business loan in this economic environment?

Business owners who have scored loans said one of the keys was preparation. Expect to explain and justify every aspect of your business. The days of just slapping down a three-year growth projection, real estate appraisal and down payment are long gone. And don’t be surprised by requests for additional data. Banks and other lenders will often ask for application revisions and additional information.

To figure out the more detailed numbers that the bank requires on your income statement, take advantage of a free consultation from SCORE, a nonprofit that mentors small businesses – www.score.org.
Banks recognize the recession has impacted small business, but what’s interesting to many is what the small business has done to adjust? Did they negotiate better terms with their vendors? How specifically did they position themselves to continue to sustain and in some cases grow their business?”
Bankers are also looking more closely at character, the first of the traditional five Cs of creditworthiness. The others are capacity, capital, collateral and conditions.
To a banker, character means a borrower is not only able but also willing to write a check to cover a loan if it goes bad.

Part of your homework should include how “fundable” your loan request is in the first place. It takes time and effort to get an SBA loan. Better to expend that effort by improving your loan request before going out and talking to banks.

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