Small Business Loans and How to Get Approved

Small business loans intimidate many entrepreneurs not just inexperienced ones. Whether you have received a small business loan before or not, you know how critical it is to your business' long term success. Unless you can leverage credit and equity you will not be able to grow small businesses successfully. Follow these steps to be as prepared as you can be so that you look your best to the banks. They hold the keys to the startup credit you need.

You should already have a detailed business plan for your small business. If not, don't be the entrepreneur who fails to develop one until after a bank rejects your loan application. Here's how to structure your detailed business plan to put your best foot forward:

• Start with an executive summary including your business name, location, your product or service, purpose for your plan, and any brief data that sells your concept. This is a great spot for a chart that highlights projected sales, gross margin, profit, and any other necessary information for the next three years. Make sure you waste no words. Shoot for one to two pages
• Move next to a more detailed market analysis and competition analysis. Show your homework and make your business look good.
• Third, include a clear proposal for a workable marketing plan, operating plan, and management plan.
• Fourth, give them a detailed part-your-hair-back financial plan. You should have every duck in a row with it's own name, statistic, and margin for error.
• End with appendices that include pictures of products, examples of services, contracts you have already landed and anything else that will put you over the top with the bank.

At the end of reading it, the bank should think your success is almost as predictable as the change of seasons.

You can't just send in paper work for small business loans usually. If you are in business, you are in sales. You have to sell the bank on your idea before they will give you a small business loan.

• Practice your presentation until you can make it without looking at notes more than 10% of the time.
• Make sure you know your plan inside and out and can field any question they throw at you. This is ideally done with a business partner playing the bank.
• As many small business loans are denied on presentation as are denied on lack of preparation of details. If you cannot convince a bank to buy your product, you probably will not convince many others either. Unless you practice and dial it in better.

Often a locally represented bank is easier for small businesses to work with than large conglomerate banks. You want a building to walk into that has people there who actually want to help you. Remember, you are not the only one applying. If you really have your stuff together, you are interviewing them.

A locally represented bank will be much easier to deal with in the future than a large conglomerate without local presence.You need a building to walk into with real faces to talk with while getting a small business loan.

That said, if you can get a much lower percentage with the large bank, do it. Find out their process for getting a small business loan and be sure to dot all the i's and cross all the t's. It doesn't hurt to mention a few other banks and drop the hint that you are trying to find the best interest rate possible.

• Perseverance is the key virtue for acquiring small business loans. If you are rejected fifteen times but end up with a loan, you have succeeded. If you quit after being rejected, you have failed. Define success as adjusting instead of giving up, and you will succeed.
• Do not sign the dotted line on the first small business loan you receive. Ask other banks to beat that rate to see if you can bring it down. You can save significant money that way. Some tight month in the future, your lower interest rate loan might save your business from going under.
• Be meticulously truthful with banks in your business plans. You do not want to be smoked out as a deceitful business person. Trust broken is hard to repair, and you need banks to trust you long term as a business person.
• Make sure you understand the difference between mortgage interest rate and APR which includes closing costs in the percentage.

* See related articles elsewhere on this page for more on small business loans and how to get them.