Throughout 2009 and 2010, small business lending was at record lows. Banks were simply not lending. In 2011, that picture started to change. The Obama Administration passed the Recovery Act and the Small Business Jobs Act, which helped the Small Business Administration lend a whopping $30 billion in FY2010.
Just a few weeks ago, on February 29th, the Wall Street Journal published a story titled, At Last! Banks Rev Up Lending. The article cites a report released by the Federal Deposit Insurance Corporation (FDIC), which stated that U.S. banks posted their biggest quarterly increase in lending in four years. That is substantial, and it is another great sign that we are on the path of recovery.
If you have been hesitant to apply for a small business loan over the last few years because you simply saw it as a pointless waste of time, cheer up. Banks are lending again, at least to some degree, and it may be time to finally make a trip to the local community bank and put this recovery to the test.
Where To Apply
The most common path of securing a small business loan is to apply for a loan through the Small Business Administration. To find local resources, simply visit the www.sba.gov website, and you will see a search box on the homepage where you can type in your zip code, and you will find the local SBA district office. You can also visit your local community bank in order to apply for an SBA loan, or a line of business credit.
Most Important Point
When you apply for a loan, a loan officer is essentially analyzing your company and your financial condition in order to determine whether you will be able to repay the loan. Thus, it is absolutely essential that you have a fully detailed business plan to present to the loan officer. However, there are two specific elements of the business plan that the loan officer will hone in on:
- Projected Income
- Projected Expenses
Remember, the entire role of the loan officer is to accurately assess whether you are a qualified borrower. The loan officer will need to see a plan of how you intend to repay the loan on a monthly basis, and this will be included in your monthly projections.
Two Common Mistakes
The two most common mistakes borrowers make when applying for a small business loan are being way too optimistic and exaggerated in terms of projected income, and, second of all, not taking into account all of the projected expenses that will most likely be accrued, such as merchant account services.
If you approach a lender with a very clear, detailed outline of both realistic income projections and accurate projected expenses, you will be ahead of the pack.
Make sure you are fully prepared with your detailed business plans and financial projections before you step inside the bank. Remember, the bank’s job is to loan money to qualified borrowers. Do your homework, and present your small business loan application in a way that represents your company well.
This is a guest post