NFIB

Get That SBA Loan
10/ 29/ 2002

by Juan Hovey

Need a bank loan to expand your business? Take a lesson from Michael Grossman and do your homework before you sit down with your banker.

Grossman secured a six-figure loan backed by the U.S. Small Business Administration to buy an Atlanta party and paper store, The Paper Parlour, last January. "It's very important to find a lender who has the ability, time and patience to help you through this arduous process--because it is frustrating," he says. "It's also important to have all your records together because they want to see everything."

It took Grossman's lender, Claudia Wilson, a regional account manager for CIT in Atlanta, about two months to arrange his loan--breath-taking speed for an SBA loan, for which Wilson credits Grossman's own preparation.

"I deal with a wide range of customers," Wilson says, "and somebody who knows his or her own requirements and knows how to present them in a clear and comprehensive fashion has a much better chance of getting a loan."

Sam Thompson, president of metroConnections, Inc., a Minneapolis event production and transportation company, is planning two big-ticket projects--expanding into another city or buying some land and building a plant to suit his needs. He figures the first might cost $500,000 and the second maybe $2 million, and like most business owners, he doesn't keep that kind of cash lying around. Hence, he'll need help from a banker, and that means planning ahead.

"The key is to convince the lender that you understand every aspect of the project and are prepared to answer any questions," says Chris Lehnes, vice president of CIT Small Business Lending, a unit of CIT Group. "Remember that an honest exchange of information allows both parties to structure the best possible deal for each other's needs."

---

What You Need

Before approaching a bank, put together the following package to increase your chances of getting a "yes":

A current income statement and balance sheet prepared by your accountant;

"Aging" reports analyzing receivables and payables;

A schedule analyzing current debt, if any;

A brief analysis of the impact of your plans on current and future operations, including realistic projections of revenues and costs; and

Personal and/or business tax returns covering the three most recent years.

These items are essential elements in any successful effort to get a business loan, according to Chris Lehnes, vice president, CIT Small Business Lending, a unit of CIT Group. They answer two questions key to any lender considering a business loan: What's the money for? How will the borrower pay it back?

---

How Do You Measure Up?

Lenders size up business borrowers by thinking about the "five C's" of credit, according to Todd Hollander, senior vice president of Wells Fargo Bank in Los Angeles.

They are character, creditworthiness, collateral, cash flow and capacity to repay the loan--and if you can satisfy your lender on each point, you stand a good chance of borrowing all the debt capital you need, Hollander says.

"At Wells Fargo Bank, a sixth C can be a valuable asset," Hollander adds. "If you are a customer who has established a solid working relationship with us, our bankers will take this into consideration along with the other C's."

---

This article originally appeared in the September/October 2001 issue of MyBusiness Magazine, NFIB's member magazine.

Small Business Sound Off
Does this story hit home?  Share your story with us