http://www.debts.org/index.php en info@debts.org Copyright 2008 2008-12-01T15:28:00+00:00 http://www.debts.org/11/index/how_to_get_a_business_loan/ http://www.debts.org/11/index/how_to_get_a_business_loan/#When:14:32:00Z If you need capital to expand your business in order to survive, then you must know how to get a business loan. Business loans were always a challenge - you needed a top-notch business plan, a healthy credit rating and sometimes collateral. Now you need all of those things plus a bank that isn’t in trouble.By their own admission, approximately 65% of banks have tightened their lending criteria for commercial and industrial loans to small businesses in 2008. A survey on Bank Lending Practices, released in August 2008 from the Federal Reserve System says that figure rose sharply from 50% in the first quarter of 2008. More.... If you have relationship with a bank that isn’t in trouble and you have a good credit history you can expect less of a problem getting a business loan. That’s not to say, however, that the bank will not want watertight evidence that you are a low risk. Banks must prove to regulators and investors that your business is not in danger but on the verge of further prosperity. Regulators and investors can then grant you the loan you need for your business and sleep soundly in their beds at night.Startup Business LoansThe most obvious challenge facing startup businesses is the lack of a track record. Without a proven credit history and performance record, banks are less likely to agree to a business loan.Tulsa-based business coach Bill Bartmann says it’s clear that banks are treating people differently. “They’ve changed their standards,” he said. “They want to see what value you can bring to the bank.”Keys to Getting a Business LoanSmall business owners must thoroughly vet the lenders ahead of making an application for a loan. Call the institution first and ask enough basics to gauge your chances of success. While there are few absolutes, banks use three primary criteria to assess if a prospective borrower represents a safe bet.1. Size of business loan Smaller financial institutions usually have capital constraints imposed by regulators. These constraints restrict the size of loans made available to businesses. Conversely, larger banks often stipulate a minimum lending amount that allows them to focus resources on fewer loans while still lending in significant volume. 2. Your industry sector Banks will be reluctant to lend to a business in an industry with which they have little experience. Look then for lenders in an area where your industry is more prevalent. 3. Location of business and borrower Lenders within the federal banking system receive Community Reinvestment Act credits lending within their geographical charter area and debits for lending outside it. The challenge of dealing with varied collection laws and other local regulations makes many regional banks unwilling to lend outside certain areas. Make The CallKeeping the above primary criteria in mind, pick up the phone and start assessing which lender is likely to give you the loan you need. It only takes a few minutes and will save you vast amounts of time. When you call a potential lender, clearly identify yourself and cover all three parameters in your query. Try adopting the following approach:“Hello, my name is John Doe and I am interested in borrowing (state your amount) for (state your type of business), located in (area). I was wondered if you would be prepared to meet with me about this?”In the time it takes to make this brief phone enquiry, you will know whether this loan provider is willing to discuss the finance you need. Or if they are even capable! If the answer is no, the only thing you have lost is time and even then not much of it. Simply pick up the phone and try again. If they say yes, then set an appointment to pitch your deal all the while boosted by the knowledge they are at least willing to hear what you have to say. The Business PlanA good pitch will only take you so far, so make sure your business plan is in great shape. Many credit officers at financial institutions will want to see financial projections prepared by an accountant. Remember to include rising costs for good and transportation. You should also ideally have three years of increasing revenues that prove you are a safe bet and capable of running a profitable business. Further to the above, the two most important aspects of your business plan is:1) Cash flow statements 2) Descriptions of managerial experienceJoe Harpster is chief credit officer for Heritage Bank in New York City, a new bank opening next month that will cater to small and mid-sized businesses. “When I meet with a business owner, I want to see a well-written plan and projections prepared by an accountant,” he says. How to Get a Business Loan 2008-11-11T14:32:00+00:00