Can Your Business Still Land a Loan?

Can Your Business Still Land a Loan?

Yes, it's still possible; you just have to know where to look

By Carol Tice   |   Entrepreneur Magazine - August 2009

Despite what you’ve heard, banks are still giving business loans. Recently, the SBA increased its loan guarantees, which is encouraging banks to lend more. But be warned: Managers are playing strictly by the rules now, says Charles H. Green, president of Sunrise Bank of Atlanta and author of Streetwise: Financing the Small Business. A credit score of 660 used to make the grade, but now 690 or 700 is the cutoff at most banks, he says. Even for healthy companies, getting a loan will take some legwork. Expect banks to ask about your business prospects, cash-flow management, and recession survival plans. “If business owners don’t know the answers to those questions,” says Green, “a bank is not ready to lend them money.”

Steve Holt, president/owner of Texas-based water-treatment company Water&Wastewater Technologies Inc., improved his chances of getting a loan by “turning over a lot of rocks.” Though the company did $4 million in annual sales last year and maintained a $750,000 balance at its longtime bank, Holt was turned down there for the $250,000 short-term equipment loan he sought last year. Through a referral, he discovered two-year-old Green Bank, a national institution with a Houston branch. Managers there thoroughly reviewed the company’s payment history, credit history and cash flow, but there were two between-the-lines factors that got Holt the money he needed: 1) the loan was for a tangible asset, and 2) Holt had more than 20 years of industry experience. He also personally guaranteed the loan, which his company has since paid off.

Despite Holt’s success with a national bank, your business’s existing bank should always be your first stop in looking for a loan, says consultant Jim Stoynoff of Synthesis Solutions. If you strike out there, look to smaller community and regional banks as a second option; these institutions generally made fewer subprime mortgage loans and may be on firmer footing--plus, managers are more community-focused. To give your company the best shot at a loan, Stoynoff suggests making a strong presentation in four key areas: company leadership, strategic direction and execution, financial performance, and risk management. “Tell banks about problems that are coming up,” he says, “and what your strategies are to deal with them.”