How Small Businesses Acquire Big Loans

Times are tough. There's no doubt about it. As an entrepreneur, you're crunching the pennies to make ends meet. And maybe you're too busy trying to stay afloat that you don't realize you're sinking. But what can you do? If you want to see more money in your company's wallet, you either put in longer hours at the office, or automate¹ your business. A lose-lose situation, right? Nobody wants to put in more time at the office than they have to, and automation requires a hefty sum of capital in the form of a loan from the bank, which is near impossible to obtain - or is it?
 
In a recent interview in the August edition of Business Week, Karen Mills, an Administrator from SBA (Small Business Administration) said that banks are lending to entrepreneurs again, but not without caution. Mills notes, "Many small businesses are under duress and looking for liquidity. But we are not taking more risk, and banks are not sending us loans that are riskier." The administrator continues to explain that if a small business expects to receive a loan from the bank, they must first provide evidence that their company has been profitable within the past two years and demonstrate how they plan to pay back the loan.
 
Sounds easy enough, but showing a company's profitability can be more difficult than you think. Former Bank Manager, Craig Fisher says "For many years, I assessed entrepreneurs for loans.  It was an accepted practice to rate those who effectively used computer systems at a much higher confidence level than those without.  In particular, those who were diligently transitioning to computerized business systems were also included at a much higher approval level." But, without the automated technology, how can you convince the bank that your business is headed for success?
 
"There are other ways to show your profitability to the bank," says Fisher. "One way is to record all of your sales in an organized fashion.  In this way, bankers will gain confidence in your ability to manage your company.  Bankers also consider the amount of equity you've invested in your company. A personal investment of twenty-five to fifty percent is preferred by banks. Knowing that you have a personal financial stake in the company gives them confidence in your business. And, you also want to make sure your credit rating is in good shape to show you won't default on payments."
 
Don't let the lack of funds stop you from automating your business. Tell the banks what they want to hear and let them know why your company deserves the cash. With the money to implement an automated system, you can sit back and watch you business grow.

¹For more information on an automated route accounting system, take a look at Solid Route Accounting™.