On one side we have 10 professional business owners who license college logo on IPhone accessories. Inside their warehouses are accessories ranging from rhinestone to full color cases for the college football fanatics.
Each of their organizations and strategic plans are superb in every aspect. They have complete packages in a binders and on their computer access is allowed for others who are a part of the decision making process, to execute intelligent decisions.
On the other side we put together a team borrowed from the local zoo
The monkeys hang off of trees while we feed them fruits and nuts. Then we make the IPhone accessory owners walk past the trees. The monkeys throw fruits, nuts, and anything else that comes to hand.
If something sticks to the football accessory merchants, we select them and give them the SBA loan. If it doesn’t, we don’t pick ‘em.
Does this sound like your SBA loan experience?
Requesting a Small Business Administration loan is like going to the carnival and playing “Toss the softball into a large milk can” game. The actual opening of the can is smaller than the outer rim at the top. This is great if you want to keep a lid on your milk can, but not good if you want to toss a softball into it.
Like tossing a softball in a small opening the SBA loan lending for the past few years has been difficult to win. The U.S. Department of Commerce has reported that SBA loan approval has returned to pre-recession levels which guarantees 90 cents on the dollar for each loan, and waives the borrower's fee.
Let’s navigate through the red tape for loan approval
The U.S. Department of Commerce quotes SBA Administrator Karen Mills, “SBA-backed lending continued the upward trend we saw beginning from 2009.” Due to the Small Business Jobs Act and a return to pre-recession lending levels, over 61,000 small businesses had access to capital in 2010.
Okay, so how are you going to join in the $30 billion dollar SBA loan trend?
Here are 5 things you need to know.
1). Know the loan
The most popular loans are the 7(a) Loan Programs. It’s for startups and existing businesses, and within the 7(a) Loan Program are four types of loans:
Express Program – Express loans to you as quickly as possible
Export Loan Program – Export product businesses
Rural Lender Advantage Program – Businesses in small communities far from metropolitan areas
Special Purpose Loan Program – These are loans targeted for specific purposes. For example, has your business been impacted by NAFTA.
There is another loan type called the Microloan which is for not-for-profit child care centers. Chances are you will be applying for one of the 7(a) Loan Programs above or the SBA 504 loan. SBA 504 Loan is a long-term, fixed-rate financing for the businesses growth, and job expansion.
2). Your documentation
What does your paperwork look like? Have you prepared the books on your company and its profile? Do you have your financial statements (business and personal), tax returns, accounts receivables, short business plan, reference letters and whatever else is appropriate?
Bankers see a lot of potential loans. This is where most business loan seekers will start. When you present your package to a banker you need to have an intelligent understanding of your business. The same standards apply when requesting an SBA Loan.
Don’t throw fruits and nuts on the desk and expect a loan
The loan administration cannot give you a loan for thousands of dollars when you aren't organized. Make sure you are well documented before you get close to the front of the line, just to be asked to get to the back of the line.
Also, in the documentation tell them the purpose of what your company is in business for, and plans for the use of the loan.
4). What is your collateral?
Your business may have plenty of assets to offer as collateral for not paying back the loan, but you are going to have to put down something. This collateral could be equity in your home, your mortgage or even your spouse’s assets.
5). Risk Taker?
Get a copy of your industry’s Annual Statement Studies Report from the Risk Management Association at www.rmahq.org. This is what lenders use to identify and see managed risk in your industry.
The Statement Studies Reports presents hundreds of companies’ aggregated financial information. The categories show balance sheet, income statement, key financial ratio and more.
Are you the Evil Kenevil of the business world?
In his career he attempted 75 motorcycle jumps over cars ramp-to-ramp. One failed attempt and he broke 433 bones earning him a historic record in Guinness Book of World Records. He was the greatest stuntman since Jesus. Only that he didn’t walk on water because he preferred jumping cars.
You have the right to be a risk taker and brag to your friends and family about your accomplishments. Avoid talking to your lender about improbable ideas. If you have a business that is solid then don’t come across as a fly-by-night, untrustworthy business.
And that, mah friend, is how you put your application to optimal use
Phil Vallone, is a co-owner of Vallo Transportation Ltd. Vallone and his sister were approved last year for $4.6 million in loans, and $2 million guaranteed by the U.S. Small Business Administration. The Vallo Transportation is a 30-year-old private school bus company.
This loan disbursement is part of a large trend that began in 2009, because of the enactment of the federal Small Business Jobs Act. This act increased incentives and funds available to small business around the country. Lots of businesses that are startups and current companies are wasting no time taking advantage of this pre-recession lending era.
Now is the time to take advantage
If you are in business or a startup, then the 7(a) Loan Program may be your way to business financing. Present well organized documents like personal and business financial statements, tax returns, short business plans, and whatever else is appropriate. Bankers see a lot of potential loans so putting up collateral to back up your agreement on repaying the loan back is a must. Do your homework and see what risks your industry has by review the Annual Statement Studies Report.
This is not the time or place so don’t be risk takers.
If you don’t believe me, try throwing fruits and nuts at the lenders and see if anything sticks.
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