Choose
a lender & size
Almost
any lender can provide funding for a profitable company with 10
years in the business. However, if that describes your situation,
you won't need much help in finding a lender! More common are small
businesses that want to grow or companies facing some business challenges
they need to overcome.
Unfortunately,
some banks just don't make an effort to reach out to small businesses.
Others might not want to take a risk with a less established company
or be able to handle the size loan you need. However, there are
lenders out there for almost any type of loan - it's just a matter
of finding them. It's important that you evaluate prospective lenders
just as carefully as they're evaluating you.
The
right type of loan
Each financial
institution will focus on different types of loans. Some prefer
to focus on real estate loans: mortgages and leases. Others may
emphasize equipment loans or ongoing lines of credit.
Each lender
will have a different attitude towards risk, as well: more conservative
lenders such as banks will avoid riskier loans, while other lenders
may take on more risk as part of their philosophy. Deciding what
type of loan you need and honestly evaluating your situation can
help you choose the right type of lender.
The
right size
Rarely
are lenders too small for small to medium sized businesses. If they
don't have the cash to handle your loan directly, they may break
it into smaller chunks and have other lenders take on parts of the
debt. This doesn't usually affect the total costs of the loan -
the broker works out the fees with the participating banks.
On the
other side of the coin, if a bank is too large, you run the risk
of getting lost in the shuffle. You'll want your questions regarding
the details of a loan to be answered thoroughly and in a timely
fashion, and sometimes, large banks are not able to provide such
service to small businesses.
How
well do they know your industry?
If the
lender has a good understanding of your industry and how your type
of business works, it can be much clearer to them how the loan will
be repaid. If, however, they don't have any experience with your
industry, they may be wary of your ability to pay them back.
Even if
they're not familiar with your business, don't give up. Take a little
extra time to answer their questions and clarify any misconceptions
they may have. The better you can explain your business, the more
confident they will be in your plans to pay them back.
A
trustworthy partner
There are
less-than-reputable firms out there who will try to take advantage
of businesses in need of quick cash. In addition to checking references
(see below) and with the Better Business Bureau, you should look
for a lender who will act like a partner. Instead of treating you
like a faceless account, they should take the time to answer your
questions and help you through rough spots, instead of calling your
loan or bumping up your rates the first time you're late with a
payment.
Check
references
A standard
approach to evaluating any business purchase decision is to check
references, and this applies to loans, as well. Have your prospective
lender give you contact information for four or five references,
preferably businesses similar to yours in size and industry.
When you
speak to them, ask questions such as these:
•
Did the lender treat you fairly?
• Did you get the entire amount you needed?
• Did the lender provide help on your application and paperwork?
• Have you had any trouble making loan payments? If you did,
how did the vendor react?
• Would you work with this lender again?
Next
Topic 
Preparing
loan application
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