SMALL BUSINESS LOAN>>

Advertisement Launching a business takes money, and finding it can be a challenge when you’re just getting started. Check out these tips on how to get a small business loan from banks and other lenders so you can get the financing you need to open or grow your business.

The Building Blocks

Banks want to see your business plan and that you’re generating cash, or at least know how you’re going to.

“Even if you’re a start-up, having accurate and current financial statements on the business is meaningful,” says Craig Street, Small Business Administration lending director for Columbus, OH-based Huntington Bancshares, the third-largest SBA lender.

The industry standard is to see two years of cash flow and financials, something hard for brand-new businesses to produce. So Street says understanding your legal structure (limited liability company or sole proprietorship) and the process of setting that up demonstrates knowledge, which can add to your credibility when applying for a loan. He recommends having clear answers for some of the “what if” questions, such as:

How will you make money if costs rise?
How will you offset a drop in demand?
What will you do if there are delays for things like equipment delivery?
Susie Leinbaugh, a senior vice president at Chase Business Banking in Dallas, TX, says it’s smart to “invest in good controls and good financials from the beginning,” especially for start-ups. This includes not taking too much money out of the business — like salaries or expenses — in the early days.

“The not so obvious piece [we look for] is the quality of the balance sheet and how conservative they are in putting equity back into the business rather than taking it out,” Leinbaugh says. “That builds a solid foundation.”

Banks also often require collateral, such as real estate or a trust account, to secure small business loans. Even if you don’t have the track record or personal assets to back the loan, meet with the bank anyway. Small business bankers can use community connections and offer advice on where to look for alternate financing.

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