2009 Small Business Guide
small business
Finding a small business bank loan

You can create a productive relationship with your banker by visiting in person and letting the banker know the important details of your business.

"It's better to make your first meeting in person than on the phone," says George Cloutier, chief executive of small business consulting firm American Management Services in Orlando, Fla. "You'll learn a lot from how you're treated, even the banker's body language."

In presenting information about your business, don't just focus on past performance. "You want to make sure you present your track record in a way that's clearly transferable to the future in the banker's mind," Sloan says.

By nurturing ties in this way before asking your bank for a loan, "you're essentially creating a relationship where the banker understands your business and is excited and updated," Sloan says. "So when you're calling for funds, the banker doesn't have to go through the education process."

2. Be prepared to show banks evidence of your business' strength. Existing businesses need to show they are making money or will be profitable soon to obtain a loan.

"If you're running in the red and not generating cash flow, you simply won't get a loan," says Cloutier. "Bank lending based on assets was the old way. Lending on cash flow and profit performance is the new way."

If you are profitable, you must show that clearly to your banker. "You need a good presentation of your current balance sheet, profit-and-loss statement and a detailed budget on how you're going to make money for the next 24 months," Cloutier says.

"Talking and waving your hands in the air isn't going to impress any lenders."

Giving your banker confidence in the success of your business is even more important at a time like the present, when banks are gun shy.

3. Contact multiple banks. If your regular bank is unwilling to offer a loan, don't give up.

"Try 10 banks rather than just two or three," Cloutier says. "Within those 10, it's highly likely that one or two will be in a mood to lend. Failure on the first two or three is meaningless."

While you won't already have developed a bond like you have with your regular bank, institutions eager to lend will be happy to start up a relationship with you as you proceed through the loan approval process.

But you have to be selective in your pursuit. "Be careful not to spend too much time chasing ghosts with banks that just aren't serious about lending," says Cloutier.

4. Get to know banks just like they are trying to learn about you. Most of what you need to know you can learn by simply asking the bank's staff. "Be candid with them," Cloutier says. "Ask on a scale of one to 10 how interested they are. Also make clear that it's OK if it turns out you're not their cup of tea."

You want to make sure that banks you approach lend to businesses like yours. Some banks focus their lending on mature small businesses rather than start-ups, for example.

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