A Small Business Loan
A small business loan is one of the most treasured commodities
in the business world. It is still very hard to get despite the
claims and promises of banks, credit unions, and other lending institutions
that they want to help American small business to survive and grow.
In fact it sometimes seems that banks and other lenders want to
see small businesses fail and only support those that survive the
battle for customers, revenues, and finances during their first
Getting a small business loan is most difficult during these first
two years, when most businesses face a myriad of challenges involved
with not only opening their doors, but hiring and training staff
and meeting the demands of customers, clients, suppliers and vendors.
The main reason that the banks use for not granting many loans during
this period is like the same reason that a student can t get a job
coming out of school. They don t have the experience.
The other major reason behind that first reason is that the banks
think that many small businesses are simply too great a risk to
offer them a small business loan. On that front they do have a point.
The majority of small businesses open and close their doors for
good during that first year and from the banks perspective they
don t want to risk losing their investment during this period.
But after a small business survives those first two years of struggle
the banks are much more accommodating. By then the business not
only has experience and has proven its capacity to overcome adversity,
it also has a track record of being in business. This will include
having a financial statement or income tax return prepared twice
as well as a record of how well they have been paying their bills
to other businesses, suppliers and vendors.
The banks are able to access this information by doing a business
credit check from any one of a number of business credit reporting
agencies. They can also access a company s payment record by reviewing
their Paydex Score which is available from business reporting company,
Dun and Bradstreet. Whenever there is an application for a small
business loan, all lenders will review this information before even
looking at the rest of the loan application.
If all the business credit checks and reports come back okay the
banks and other lending institutions may look further into the business
requesting a small business loan and this often includes a personal
financial check on the owners or operators of the company. They
may ask for business references to follow up with and they may even
ask for a personal guarantee or collateral before granting a small
Agencies like the Small Business Administration can assist small
businesses to obtain a small business loan since almost all of the
monies provided to small businesses are guaranteed by them even
before the bank loosens up its money strings.
David Gass is President of Business Credit Services, Inc. His company
publishes a weekly e-newsletter on Starting and Growing a Small
Business at http://www.smallbusinessconsulting.com
You can sign up for their free newsletter by visiting http://www.smallbusinessconsulting.com
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