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Small Business Loan Process

Nothing about being a small business owner is easy. And securing the money to start, operate and grow your business might be the most difficult of all. But that doesn’t mean it’s impossible. Far from it.

Banks and credit unions have money to lend, and they want to do business, but they expect borrowers to dot all of their i’s and cross all of their t’s. That takes hard work, but thousands of entrepreneurs are willing to do it, and they are rewarded with the money they need to start and grow their businesses.

While small business lending can seem to be a rather daunting process, the following flow chart, which can be downloaded as a pdf file, provides you with a “one-page” overview of the process. Prospective borrowers should know that there are quite a few resources that will provide either no-cost or low-cost guidance to help you through this process.

There is one given in this process: If you are ill-prepared to meet with lenders, you won’t get a loan. Do these things:

1) Ask yourself these questions: Do you have a good credit score? Do you have assets (collateral) to secure your loan? Do you have experience in your industry? Can you show a bank that you can repay the loan?

If you answer no to any of these questions, find out what you can do to answer yes to all of them. If you can’t answer yes to these questions, a bank will not loan you money. Period.

2) Go to the U.S. Small Business Administration website. The website has a section called Starting & Managing A Business that has plenty of great tips.

3) Write a business plan. A lender will want to see that you understand your business, know the market,  figure out how much money you need and explain how you intend to operate and make money. Writing a comprehensive business plan is easier said than done. Get help from a professional writer who does this work, from SCORE, a non-profit group of 347 chapters nationwide that mentors entrepreneurs, or from the Small Business Administration.

4) Compile your documents. Include personal financial statements, balance sheet and P&L statements. Most banks require at least five years of forecasted financial statements before they will make a loan.

5) Find a mentor and/or create an advisory board. Don’t be a loan wolf. Get all the help you can from smart people who you trust. Again, SCORE is a great source.

Ten Questions to Ask Your Banker When Applying for a Business Loan

You received a loan! Congratulations!

You didn’t receive a loan. Don’t give up!

Ask these and other questions:

  • Why was my request denied?
  • How can my business plan be improved?
  • What else can I do to better prepare my loan application?
  • What help can I get to improve my application?
  • Are there other lenders who might be more willing to lend money to entrepreneurs in my industry?
Frequently Asked Questions

You addressed these concerns and received your loan! Congratulations!

Still no loan. Keep working.

Get as much help from others.

Use the advice you received from these sources to strengthen your business plan and loan application and re-apply for a loan. 

hampton roads chamber of commerce thomas nelson community college small business association george mason university