Tips to Improve Your Chances of Getting a Small Business Loan
 Getting approved for a business bank loan is not always easy when starting a small business. This is especially true for a small business that is starting out with no revenue and with an owner that doesn’t have experience in the business.
Even if you have a great relationship with your bank, and you have received personal loans in the past with little difficulty, once you mention the word small business loan, then you have shut a door in your face and you need to go through a long application process.
You have to look at this from the bank’s point of view. When you do, and if you don’t get approved, well, they may have saved you some heartache and a lot of money. Here’s why:
Banks have hundreds and thousands of application each month for small business loans. The also have thousands of loans already in the works. So it’s safe to assume they can tell if your business has a chance of surviving.
They have enough experience to make decisions about your business. And they are right almost every time. When they are wrong, it’s usually because they approved a small business loan for a business that failed, not because they missed out on a loan for a business that ended up being successful after they had turned them down.
So if they think your business won’t make it and it’s a high risk, then your business loan will be declined.
Banks are in business to make money and that’s it. They are not there to accommodate you because you’re a nice guy; they have to make decisions based on certain proven criteria.
Now that we have gone over how the bank looks at loans, let’s go over some tips for getting approved.
Apply for a Personal Loan Rather Than a small business loan
The quickest way to get the money you need is to apply for a personal loan and use the money for your business.
This will eliminate the need for a business plan and the process of going through the business department of the bank. When you apply for a personal loan, they can depend on your job income and the loan is viewed as less of a risk. Of course, we are talking about a few thousand dollars only.
If you walk into the bank and ask for a $250,000 personal loan, then they need to know where the money is going. A quarter of a million won’t work for a consolidation loan.
Have a Business Plan Ready
If you’re going to apply for a business bank loan then you need to have a business plan in hand. A bank won’t even look at your loan without a business plan. The business plan shows that you are serious. It outlines the details of your operation and lets the bank know how you will be operating your business.
Talk to Your Banker
Some good ground work would be to meet with your banker and discuss the best way to apply for the loan - what they need and what you need to do to get approved. Usually your banker will set you in the right direction and will give you tips to help you get approved.
Have a Payback Plan in Place
Banks need security. When the loan is secured and the payments can be made without a problem, there is a good chance for approval. Be sure to emphasize your plans and schedule for payments.
Make Sure You Have Enough Collateral
You must have assets that will cover the loan in case things go bad with the business. With the proper collateral your chances of approval are greatly increased. You should be aware that the collateral has to be something the bank sees as appropriate.
You can’t say my car is worth $15,000, my house is worth $150,000, I have property, etc. The bank needs appraisals and proof. Your house may be only worth $90,000 on paper and even then they will only give you a percentage of that. You might have property in a different state and that may not be useful at all for the bank. The collateral must be valuable in the eyes of the bank.
You have to keep in mind that if you default on your loan, the bank then has a bunch of assets it has to unload.
Banks are in business to make money and they may, in fact, save you some heartache if your loan is declined. If it is, find out what the problems are, address those concerns and try again.
That's the Way I See It!
Acey Gaspard
See Our Small Business Financing Gudie
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