Despite the fact that you may
own a growing business, have a great credit score, and are a competent business
person – obtaining a business loan, business line of credit, or other type of
credit facility in today’s economic environment has become increasingly
challenging. While the federal government has made great strides to keep
interest rates low, lenders (including banks, financing companies, and private
lenders) have kept lending approval rates at historical lows. This has been
especially true for small business borrowers. Recent statistics show that some
financial institutions have cut their small business loan portfolios by more
than 20% over the past year. This trend is expected to continue among lenders
until substantial improvement in the general economy becomes widespread and
apparent.
When approaching a potential
lender for obtaining a business loan or other type of business financing
facility – it is imperative that you have all of the appropriate documentation
in place for them to effectively render a lending decisions. This most important
of these documents is your business plan. A well written business plan for
obtaining a business loan focuses on your business, what you intend to do with
the debt funding, and how you will ultimately payback the loan over a certain
period of time. You should be immediately aware that while interest rates have
remained low via actions by the US Federal Reserve, the interest rates applied
to traditional business loans and business credit lines has increased
significantly. This is especially true if the business loan that you are seeking
is not an SBA backed business credit facility.
As business loan terms and
covenants have become more complex given the struggling economy, you should be
prepared to clearly showcase every aspect of your business to a potential
lender. This website will assist you in developing a competent business plan
that can be presented to a business loan lender. We will also discuss a number
of topics including alternatives to traditional business loan financing, using
the Small Business Administration to help with your capital raising activities,
and other methods of business financing.