Saturday, September 12, 2009

Where do I get a loan in times like these?

Many small business owners in need of loans feel they have been left out of the various government stimulus programs during this recession. The hard truth, of course, is that loans to small business are difficult to obtain in the best of times. Lenders are even more cautious and conservative during downturns.

Here are a couple of things to think about, however. First, a 2009 study by the Kauffman Foundation found that more than half of the Fortune 500 companies were launched during downturns. Perhaps that should be obvious… half during downturns and half during good times? The point, of course, is that good business concepts with good planning and good execution will find the financing needed, regardless of the economic environment.

Fortune Small Business magazine, September 2009, p.25, reports that this year’s American Recovery and Reinvestment Act added $50 million in loans to the SBA’s $21.4 million microloan program (for loans up to $35,000), as well as $24 million in technical assistance for these loans. Further, the senior vice president for commercial lending at the American Bankers Association reported, “Small businesses that go to small banks have higher loan-approval ratings.” Small, local, conservative banks are still generating funds that need to be placed in loans to approved businesses with demonstrated needs. That is the business they are in.

You are still going to have to demonstrate that you have the assets to use as collateral if you default on the loan. Also, you must demonstrate that you will have the cash flow to service the loan. This is standard practice. It just seems more onerous in “these times.” It is not. It is what commercial lending should be in order for financial institutions to be as successful as we each want to be.

Is your business prepared to meet these standards? If so, there is likely a financing source available for your business.

What are your thoughts? I'd really like to hear from you!

Dr. Bill - I love to share, I hope you do to! ;-)