Small Businesses on Borrowing Money
The recovery of the economy of the US only implies that small businesses should become more creative when it comes to searching for guarantor loans.
However, for those companies that has efficient business strategies have a greater chance to acquire one. Their options would include borrowing from traditional banks and financial institutions that are affiliates of the Small Business Administration, as well as financial services from online-based lenders.
According to the chief executive officer of the American Management Services (that offers consultation services to small businesses), George Cloutier, “For creditworthy, high-scoring small businesses, there is money available.”
“The best place to get small business loan is still a bank. Banks typically offer the lowest interest rates and many have established reputations as trustworthy lenders,” said Cloutier.
“Many small businesses try 3 or 4 banks and then stop looking. Take out the phone book, target ten banks and work through that list,” he added further.
It is important to note that using a more persistent approach and business strategy has a greater chance at achieving success. This strategy actually worked for Michael McKean, who is the founder of the Knowland Group —- a company that offers help to hotels to acquire clients that would fill up their conference rooms.
During the past few years as The Knowland Group is at the peak of their success, McKean started to search for a bank that could give an expanding company an access to loans.
According to McKean, “We talked to every bank in our area, at least a dozen. Many came back with proposals, but the terms were very onerous. Or sometimes they shifted terms.”
And finally, the MandT Bank gave them access to a loan.
“They just wanted to get our business,” said McKean.
According to him, they didn’t approach MandT dissimilarly than they have approached any other banks. “It was just a matter of being persistent until the right deal came along,” he says.
Furthermore he added, “We did everything right, approaching the right person at each bank. We’re a profitable business. I think it was just the credit crunch that prevented us from getting a loan.”
Cloutier, however, says that the primary factor to success with banks is for companies to show how profitable they are or they were, and to describe an effective and efficient strategy to gain their future profits.
Cloutier said, “If you aren’t making a profit now, you must be able to tell the bank how you will change that in the short term, or you really won’t be able to get a loan.”
He highly recommends to businesses that they should start small when requesting for a loan from any financial institution.
“If you need money for 4 trucks, ask for 2,” says Cloutier. “The bigger the loan request, the harder it is to get it approved.”
Another way to acquire a loan is through the Small Business Administration (SBA). They can help direct you to institutions that offer loans that are guaranteed by the SBA. Through this, you will have the advantage of getting loans from banks that are interested in giving loans to small businesses.
Those who are interested in borrowing money should contact the nearest SBA office or look over their website. The acting administrator of SBA, Jeanne Hulit, is encouraging businesses to look for banks that are experienced SBA lender.
Financial institutions that grant loans guaranteed by the SBA put great importance on business plans, as well as cash flow and profit forecasts in terms of deciding whether to lend or not, according to Hulit. The SBA may also refer businesses to several counseling centers that offer free services to enhance their performance.