WOJTOWICZ: Prepare, then apply for small-business loan

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Q: My store needs to be remodeled to make it more attractive. Despite that, I’ve got a good business, so I also want to expand and build inventory. All this takes a lot of money and requires additional financing. How can I be sure to get the money I need?

A: The short answer: Go to a banker you know in your community and be prepared to discuss all aspects of your business, even the negative ones. Before you pick up the phone to book an appointment, review the material you will show the banker.

Your banker will need to see your updated business plan. More on updating your plan in a moment. First, review your mission statement. I hope you have one, because a concise mission statement helps you build a business plan. Why? A mission statement focuses on your company’s original goals. We all need that reminder, because everyday distractions threaten to pull us off course.

Here’s a mission statement for a local company: "Helping people help themselves.” This happens to be for a retail store, but it could also apply to a not-for-profit organization. In that regard, is it too general? As yourself: Do employees of this company understand what it means and does the statement help them keep their eyes on the ball?

This mission statement is more specific: "Solve complex network computing problems for governments, enterprises and service providers." This statement obviously defines a computer services provider. It identifies who their market is and what they do. It’s for an international company, Sun Microsystems. Their employees should be able to access the mission statement and use it to refresh their purpose, no matter their location.

To write (or refresh) your mission statement, think about what you do, how you do it and why you want to do it.

A mission statement should help sharpen your focus on your business plan. You already have a plan if you have previously obtained financing. Bring it up to date and make realistic projections for the next three years; explain what the future would look like if you did, and did not, obtain new financing.

It is often helpful to deliver your business plan, projections and request to the banker in advance of the meeting so that your time together can be more productive. This shows that you respect the banker’s time.

Be very forthright with bankers: They are adept at separating wishful thinking from meaningful facts. In other words, base all your projections on realistic scenarios, not on best-case examples. Always be able to answer hard questions about what you will do if the economy turns sour or your plans fail to help your business grow.

Be upfront when you talk about the promise—and the perils—of your business. Even a measured risk could result in failure, and your banker will want to know you understand that.

Now let’s talk about banks. Find the right one for you. You are already in business, so I assume you have established a good relationship with a commercial banker. If not, you should ask other business owners for referrals to commercial lenders in your area, and then get to know them before you talk dollars and cents.

Even if you have a strong banking relationship, be aware that you may need to make a change to best meet your needs. Recently, a business owner in a small Indiana community was advised by her company’s longtime lender to find a new bank. There was no time to build a relationship, but the business owner found a new lender on a referral from a friend and secured financing.

Anticipate every question. If a banker asks you a question that stumps you, say “I don’t know but I will find the answer and get back to you.” And then do it within 24 hours, providing ample background information.

Some business owners have successfully raised money through cloud funders such as Kickstarter, Indie GoGo and RocketHub. Other potential business funders may help, but some require you to use all or part of any retirement funds you may have saved.

The good news for you, and every business owner, is that commercial lending dollars are almost back to pre-recession levels. The Thomson Reuters/Pay Net small-business lending index (measuring new small-business loans) ended 2012 at its highest point since 2008‘s first quarter.

Among government-assisted alternative programs, the U.S. Small Business Administration supported 1.3 million 504 and 7(a) loans in the first quarter of fiscal year 2013, an increase of 11 percent over the previous year. The average amount of those SBA  loans was up 3 percent to $667,000.

The lending world is complex, but the best way to start is by preparing yourself and talking with a banker you know and trust.


Wojtowicz is president of Cambridge Capital Management Corp.

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