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Business Loans – What Lenders Look for and Tips for Winning Them Over

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Business Loans – What Lenders Look for and Tips for Winning Them Over

By Caron_Beesley, Contributor
Published: January 22, 2013 Updated: July 14, 2016

Securing small business financing can be challenging. Whether you are just starting out or looking to grow, banks and lending institutions can be rigorous in their lending review practices.

For example, businesses with few assets to their name may find it hard to secure a traditional loan. Other business owners may not be able to provide the reassurance that lenders seek to alleviate their concerns that your business may fail and the loan won’t get repaid. So when you approach a lender, it’s just as important to understand the basis on which loans are made as it is to stack up your financials and business plan.

So what are lenders looking for in a potential loan applicant? Here’s what you need to know.

Loan Applicants Need to Check off Several Boxes

What are loan officers looking for when approached about a loan? Here are some basic “must-haves” that the ideal candidate might be expected to evidence:

  • That you have sufficient assets, financial reserves and personal collateral to endure business fluctuations (and still pay off your loan)
  • As an existing business owner, you’ll need to show that you have solid cash flow, sufficient to repay the loan
  • New businesses need to evidence that they have a track record of profitability and success in a  similar business endeavor

Let’s face it, that’s a tricky list for any prospective or existing small business! So what are your options? Proving your creditworthiness is still possible, with some planning and preparation.

How to Prove Your Creditworthiness

Bankers need to make money, and while they may have an ideal candidate in mind, even they have to compromise­—this is where your opportunity lies. The trick is to demonstrate, using other means, that you are a creditworthy business owner. For example, if you are new to this business, can you show success in managing a similar business another field (even if you weren’t the owner)? Perhaps you’ve owned or managed a profitable business in a different industry? Lending officers might be more agreeable to your application if you can show that you supplement your own experience with that of someone who also has success in the field.

Putting yourself in the lender’s shoes is a good starting point. It’s much like a job interview, where you form an understanding of the type of candidate the employer is looking for and prepare your application and anticipate questions accordingly. Ask yourself: “Why should this lender think my business can succeed where others have failed?” and have a thorough answer prepared, plus a detailed explanation of how the money will be used and your plan for paying it off.

Step Back and Prepare

Key to this preparation is a solid business plan, good personal and business credit, and some expert help. The following SBA resources and tools can help guide you down this preparation path:

  • Build a Business Plan Online Tool – Putting pen to paper to write a business plan isn’t the easiest of tasks. Check out this new tool from SBA that guides small business owners through the process of creating a basic, downloadable business plan—and offers pointers on essential elements like cash flow and financial projections. The great thing about this tool is you can build a plan in smaller bites, save your progress and return at your leisure.
  • Clean Up Your Credit – Business credit is an asset and considered an economic resource that makes up the financial foundation of a company. Lenders look for assets. SBA guest blogger Marco Carbajo blogs regularly about how to build your business and personal credit to help secure financing. Check out his article, How To Build Business Credit For Your Start Up, and view more of Marco’s articles here (you’ll need to log into the SBA Community to follow this link).
  • Consult an Expert – Whether you need help finding the right loan for your business or a guiding hand that can help you through the application process, don’t feel that you have to go it alone. Local Small Business Development Centers, Women’s Business Centers, and SCORE (a mentoring organization for small businesses) can help you through the process. Find one of these groups in your community.

Can’t Get a Business Loan? Consider Alternative Financing from SBA Loan Programs

If you or your lender decides that you aren’t the right candidate for a traditional business loan, you still have options. Consider an SBA Loan Program. The SBA doesn’t lend businesses money; instead, these programs take the risk away from the banks and encourage them to make loans to small business owners by guaranteeing part of the loan.

Check out these additional online learning resources that can help you navigate the SBA loan process:

  • How to Prepare a Loan Package
  • Video interviews with successful entrepreneurs who share the lessons they've learned about owning a small business and securing an SBA loan

About the Author:

Caron Beesley


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


Thanks for posting this article. Credit does matter both for traditional business loans and alternative option. Lenders who specialize in alternative lending also look at the positive cash flow as mentioned in your article and an earlier comment. Having positive cash balances for more than the last 4+ months of business is favorable and can be the difference in qualifying for funding. This includes cash receipts and credit cards. SBA loan programs are very helpful and if businesses can qualify are a viable option. Also, there are alternatives for funding from other lenders that include factor, asset based, merchant cash advances, and even 401k backed options. Thanks again for your article... I found it very informative.
Business owners seeking financing should work with knowledgeable experts to reduce any headaches that may occur from the loan application process. Research is also key; there are different resources that are available. Even though I consider myself knowledgeable, I learn about newer options daily. There is a loan out there for everyone.
If you really want the best shot at having your loan application approved, then the most important thing you can do is to prepare before you apply. This means cleaning up your personal credit report, and preparing a stellar business plan.
I think Positive cash flow is equally as important, because this will allow the lender to feel more confident in the business’s ability to repay the debt. It also shows that the business is successful, and capable of additional growth.
Knowing everything about your business will also help you to convince the lender to give you a loan. You also need to be sure that getting a loan from a bank is the right solution. Try to borrow only the amount you need and not the most you can't get. Make sure that you factor in interest on the loan that will cut into any profits that you will make. I thinks that info so great and useful ! Thanks and best regards
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One comment I would add is that if you're looking to build up commercial credit, get your DUNS number with Dun & Bradstreet. Then put that on all your information that you exchange with vendors so they will start reporting your payment history to D&B and other trade credit services.
(Thanks for reaching out about your recently moved comment on the SBA.gov Community. Youll note in the Rules of Conduct that to maintain quality of discussions, contributions that do not provide a substantive purpose or relevance will be removed. If you have additional commentary related to the discussion topic or blog post, youre welcome to post that along with your original comment. Thank you for your understanding and for joining us on the SBA.gov Community.)
Great article Caron, thanks! I also agree that it is important for a business to be prepared and to know the answers to questions about their business' gross annual revenue, monthly credit card transactions numbers, etc. Additionally, some businesses may not be aware of lenders that can help them besides the traditional banks, when they may not meet those qualifications, or if they don't want to go through the long, tedious process with a traditional bank with a mountain of paperwork required. Some lenders can lend businesses cash, within a few days, and up to 250k+, as long as the business is in the United States, is at least a year old in most industries, grosses at least 100k annually, and is not related to real estate, finance, or insurance. There are even non-restrictive, revenue based business loans and no personal guarantee business loans available with no upfront fees and no personal information even required to get a pre-approval. So I do agree a business owner can look at alternatives and see what type of funding fits his or her needs. Also, great tools listed above too. I'm sure lots of people will benefit from your article!
Hi, You are right. Preparation is key when trying to get a business loan. You also have to be sure about all aspects of your business. How much profit you will make? How much cash flow do you have? If you do not know or cannot show that you will be able to pay back the loan the banks will not just hand over cash to you. Knowing everything about your business will also help you to convince the lender to give you a loan. You also need to be sure that getting a loan from a bank is the right solution. Try to borrow only the amount you need and not the most you can't get. Make sure that you factor in interest on the loan that will cut into any profits that you will make. It is also worth researching the lender that you plan to get a loan from. Make sure that they are in the position to lend you the money. Some banks may not be in that position and may lead you on for a few weeks before finally turning you down. This will save you lots of time, time that you can spend working on building your business. Thanks for the links in this article ("How to Prepare a Loan Package"). They were really helpful.


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