Need a Small Business Loan? Tips for Researching Lenders and Preparing a Winning Loan Proposal

This spring did;t just usher in a much-needed respite from one of the worst winters on record; it also brought new hope for the American economy and small business owners in particular.

If your small business has struggled to get financing in the past, or you are thinking of getting a loan to fund new growth, here are some tips to help you understand what SBA-loans are available, where to get them, and how to prepare a winning loan application.

What SBA Loans are Available?

There are quite literally hundreds of government-backed SBA loans, each developed to suit the needs of your particular business - whether you need start-up funds, export-assistance funds, are struggling to pay off debt, or are a veteran seeking to start and grow your business.

For more information about these various programs your best source of information is this comprehensive SBA Loans Guide from Business.gov which includes a Loans and Grants Search Tool that matches your specific needs with available loan programs.

If you are worried about your eligibility for a business loan or have a poor credit score, be sure to read-Loans for Business Owners with Poor Credit Scores

Who is Lending?

Yes lending is on the rise, but researching and finding the right bank in your own community can be time-consuming, which is why i's worth talking to your local SBA District Office. They can point you to SBA lenders in your area as well as provide guidance and advice about loan eligibility and application requirements.

If you are doing your own research, try to seek out a bank or credit union that has been through this process before and is either a Certified SBA Lender (CLP) or Preferred Lender. You might also refer to this Business Week slideshow (based on SBA data), which lists the *Top Small Business Lenders of recent years.

Preparing a Loan Proposal

When preparing for a loan, you must prepare a written loan proposal. Lenders look to a loan proposal as evidence that your business has strong management, significant experience, and a thorough understanding of the marketplace. The'll also look for relevant financial information showing net worth and sales projections that will reflect your ability to repay the loan. Lastly, any lender will want to know about your suppliers, distributors, employees, and manufacturing relationships.

The SBA offers the following tips to help your business improve its chances of obtaining a small business loan with a properly prepared written proposal.

Step 1: Before you put pen to paper, there are four things you need to be able to clearly address in your plan:

1. Who you are (your business profile)
2. How much money do you need?
3. How you will repay the loan (projections, etc.)
4. What will happen if you ca't repay the loan?

Step 2: Be sure to structure the elements of your loan proposal as follows:

• Summary - Like all good executive summaries, this is the last thing you should write, even though it sits at the front of the proposal document. Use it to summarize how the loan will be used and repaid, and the benefit it will bring to your business.
• Senior Management Profiles - Summarize key experience, qualifications and credentials, and be sure to include back-up detail in resume format.
• Business Description - Include your business history and a summary of current activity. You can summarize information from your business plan to show you understand the market and your industry. If you have company collateral, such as brochures, include these too.
• Projections - These include projected income and cash flow statements for 2-3 years. Be prepared to answer questions about what happens if your assumptions do't materialize.
• Financial Statements - Include business and personal financial statements and anticipate questions about fluxes and any major trends in your statements. You may also need to submit your income tax returns for the previous three years.
• Loan Purpose - Explain in a detailed statement how you intend to use the funds.
• Amount - Be realistic about what you need and confident about how much you will get. You are negotiating your future business growth after all.
• Repayment Plan - Outline your preferred repayment terms, but assume that this will need to be negotiated with your lender based on their risk assessment of your business.

SBA Loan Application Checklist

Most banking institutions will have separate loan application processes, but if you are pursuing an application for an SBA loan, there are specific types of information that you'll need to provide. And remember, you must work through your bank for an SBA loan. The SBA itself doesn't provide direct loans; your lender will submit your loan package to the SBA for approval.

Be sure to review this SBA Loan Application Checklist from Business.gov to ensure you have all the forms and information you need to secure your loan.

Related Articles

• Tips for Getting Your Small Business Loan Request Approved (Even in Toda's Economy)
• SBA Small Business Loans Explaine'Availability, Eligibility and the Application Process
• A Bank Alternative: FAQs About Credit Unions
• Professional Presentation' Key to Attracting Business Investors
• I'm Applying for a Loan. How Do I Know if I Have Enough Collateral?
• What Happens When I Default on a Business Loan?
• The Basics of Revolving Lines of Credit

* Note - Hyperlink directs reader to non-government Web site.

About the Author

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley