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3 ways to get a small-business loan

The recovering economic environment has meant that small businesses have had to be more creative when looking for loans.

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However, companies with sound business strategies still can borrow. Options include loans from traditional banks and institutions affiliated with the Small Business Administration, as well as financing from Internet-based lenders.

"For creditworthy, high-scoring small businesses, there is money available," says George Cloutier, CEO of American Management Services, a consultant to small businesses.

Bank loans

The best place to get a small-business loan is still a bank, says Cloutier. Banks typically offer the lowest interest rates and many have established reputations as trustworthy lenders.

"Many small businesses try three or four banks and then stop looking," Cloutier says. A more persistent approach has better odds of success.

"Take out the phone book, target 10 banks and work through that list," he says.

That strategy worked for Michael McKean. He is founder of The Knowland Group, a company that helps hotels fill up their meeting space.

A few years ago, as the success of The Knowland Group grew, McKean began searching for a bank that would give the growing company expanded access to credit.

"We talked to every bank in our area, at least a dozen," McKean says. "Many came back with proposals, but the terms were very onerous. Or sometimes they shifted terms."

Finally, M&T Bank came through.

"They just wanted to get our business," McKean says.

McKean says his company did not approach M&T any differently than it had approached the other banks. It was just a matter of being persistent until the right deal came along, he says.

"We did everything right, approaching the right person at each bank," he says. "We're a profitable business. I think it was just the ... credit crunch that prevented us from getting a loan."

Cloutier says the key to success with banks is to show past profitability, and to describe a well thought-out plan for future profits.

"If you aren't making a profit now, you must be able to tell the bank how you will change that in the short term, or you really won't be able to get a loan," he says.

He also recommends that businesses start small in their loan requests.

"If you need money for four trucks, ask for two," Cloutier says. "The bigger the loan request, the harder it is to get it approved."

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