7 tips to land a Small Business Administration loan
It’s getting harder to find a loan for your veterinary practice. But it’s not that the money isn’t out there—it’s because small business owners have to work harder to get a loan. Rachel Zippwald, vice president and SBA business development officer for California Bank & Trust, has these tips to help small business owners land a loan.
1. Provide details on exactly how much financing you need and how you’ll use it. Banks like specifics, so be prepared to provide a precise dollar amount and give details of how you’ll use the funds. For example, if you’re seeking $125,000 to expand your veterinary practice, explain to your lender how you’ll use the funds: Perhaps you need $75,000 for working capital to support three months of expenses and another $50,000 for seven networked computers and a server. Banks are impressed with research, so provide a written quote for the equipment.
2. Provide information about management. When banks lend money, they want to know who runs the business and to be familiar with their backgrounds. This is a key factor in presenting your loan for approval. Help your lender by providing a résumé for each practice owner and describe his or her functions and responsibilities. If certain key positions haven’t yet been filled, include a thorough job description of the type of person you’re seeking. This will confirm for the lender that you’ve analyzed your needs and determined the requirements of the position.
3. Be prepared to offer collateral. The SBA requires collateral to the extent that it’s available to fully secure your loan. If you own a home, you’ll likely be asked to pledge it. The SBA may also request a lien on your business assets and require life insurance on sole owners. Most loans made by banks are secured loans, and therefore approval may be contingent on a guarantor who’s willing to offer collateral.
4. Detail your credit history and credit score. This illustrates to the bank the ways in which you handle your other obligations. Your bank will eventually run its own credit report, but if you can provide information prior, you can discuss any issues ahead of time. If you don't know your credit score, take the time to research it. If you've had problems such as identity theft, bankruptcy, or divorce, you’ll want to discuss it with your lender up front and provide proof that the issues have been resolved or discharged.
5. Provide complete copies of tax returns and financial and bank statements. It can be time-consuming to gather these documents, but your bank will want to know everything about you and your business. One way to streamline the process is to scan your financial documents and provide them to your lender in the form of a CD or a flash drive. Your lender may even be willing to accept your documents via e-mail.
6. Explain how you’ll achieve your projections. This is the time to brag about yourself and your business and sell your lender on your vision and forecasted success. If clients have expressed a desire to do business with you, give your lender a copy of their correspondence. Prove to the lender that a market for your product or service exists and demonstrate the validity of your financial figures.
7. Expect questions and be patient. Your lender needs to connect with your story and business and will appreciate your assistance in doing so. Take the time to thoroughly explain the nature of your practice, your vision, and your background. Your banker will likely present your loan approval to other parties, so he or she will need your help in making your case. It helps to be patient. Feel free to request an estimated time frame for approval and respect that the projected date may slip a bit. It’s best not to call or e-mail your lender frequently—remember that in lending, no news is often good news.