Business owners can expect to be scrutinised and taken through strict financial processes before getting credit approval and loans from lenders. However, when one has knowledge about lending requirements and adopts the appropriate strategies, one can access small business loans with ease.
In a May 26, 2009 Timesfreepress.com article titled: “Small Business Owners Get Help from SBA Loan,” Amy Williams reported the Small Business Administration (SBA) announcing that more businesses will be eligible for SBA-backed financing. The policy took effect from May 1, 2009, will continue till 2010.
The Timesfreepress.com article also reported lenders who deal with the SBA as pointing out that the volume of credit available to undersized companies in the United States has been up more than 25% since March 2009. The SBA’s decision to guarantee more loans and the increase in volume opens a great opportunity for easy access to credit from banks among owners of smaller companies.
Despite the opportunities created, prospective borrowers have to know how to take advantage of the situation to secure credit approval from financial institutions who continue to apply strict lending procedures. The following are some of the basic tips on how to obtain small business financial support.
Good Business Plans for Loans
In order to have a credit application approved, applicants need to provide sound business ideas and be in a position to justify the viability of the projects for which the money is being sought. In an articles published in the New York Times on May 27, 2009, Scott Medinz wrote that to be able to get credit, those who want to apply for a small business loan should be able to show bankers that they have a viable plan on how they would utilize the money.
It is therefore important for prospective borrowers to know how to tailor their business plans to the specific requirements of lending institutions. Medinz pointed out in the NYT article that bankers are emphasizing the need for small business borrowers to know which measures lenders place emphasis on when evaluating applications. Applicants should learn to rationalise and defend projects they are seeking money for.
Building Strong Relations with Banks
To enhance the chances of getting money from creditors, borrowers need to build good relationships with potentential financiers. AllBusiness.com, an online e-commerce company, pointed out in a 2005 article headlined: “Small Business Loan Tips,” that building personal relationships with bankers is a very crucial practice. “A lender who knows and trust you is more likely to take a gamble on your …loan,” the publication emphasized. It is also important that such relationships are built for long-term purposes.
Quick money from Small lenders
Bigger banks may appear to be ideal creditors but a survey conducted in May 2009, by Barlow Research Associates demonstrated that smaller banks tend to give out loans to smaller businesses than larger ones. Furthermore, the study revealed that businesses that had loans from small banks in the preceding year were three times likely to be approved for loans than companies that chose to apply to larger banks. Chances of small company owners getting money from smaller financial institutions could thus be greater than it may be with bigger ones.
Improve Credit History Score
Demonstrable credit worthiness is perhaps the biggest asset a company owner could have. With a good credit score, it will be always easier to obtain the needed amounts for company expansion or setting up new businesses. Though most potential borrowers may often complain about unwillingness of lenders to give out money, the NYT article quoted Sherrill Stockton, senior Vice President of Sonoma Bank as saying, “fact is, a lot of borrowers are just aren’t credit worthy.”
Good business plans, strong relationships with lenders and smaller banks, and improved credit history and score are among the essential requirements for obtaining small business loans.
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