A recipe for putting loans in reach

Obtaining a small business loan can be fraught with challenges. Last year, less than half — 47 percent — of small businesses that applied for a line of credit received the full amount requested. For a company looking to expand or simply improve the efficiency of its operations, that’s a dispiriting rate of rejection. But opportunities still exist.

To maximize the chance that your small business can obtain the capital needed, there are fundamental steps that you can — and should — pursue.

Prepare, prepare, prepare.

Before approaching a commercial lender to discuss financing your small business, gather the following materials:

– Business plan
– Recent personal financial statement (less than 12 months old)
– Two to three years of tax returns
– Five years of business projections
– Proof of assets (collateral)
– Profit, loss, and balance sheets from the current year

These materials provide an accurate and detailed overview of your current financial strengths and weaknesses, areas of risk, and overall financial standing. The materials must be comprehensive and your projections must be realistic and logical, reassuring a bank of your company’s profitability potential.

Think local

With dozens of large commercial banks in the region, consider approaching a community bank instead, which may offer advantages:

Reduced banking fees
While community banks might charge service fees for cash management, in general, their fees are lower.

More than a number
When assessing a small-business loan, community banks look beyond just the numbers, working through the application alongside you to understand the story behind your business. Was there a one-time unfortunate circumstance? Are there any issues that could be overcome (and if so, how)? Instead of seeing a potential risk, small-business banking lenders find out how to mitigate it to ensure success.

Always connected
Community banks meet with small-business borrowers at least quarterly to check on the company’s finances and proactively identify and mitigate problems, often before they arise. They’ll discuss your profit-and-loss statements, aging reports that track inventory movement, supplier payments and relations, and seasonal trends that impact business performance, offering suggestions where appropriate.

Community banks are also easy to contact. Most employees will greet you by name when you visit, and a banker is easily accessible by phone, providing personal reassurance that the lender has your best interests top-of-mind.

Personalized planning
Community banks are intimately involved with business planning, ensuring fluency with your business needs. After analyzing your business reports, they’ll provide you with a personalized proposal, which they’ll adjust as necessary based on your input. This ensures that the financial plan works for both the bank and you.

Long-term partnerships
Community banks are closely aligned with their small-business clients, providing them with the necessary support to align with their individual growth pattern. They will conduct annual reviews to evaluate upcoming business needs and adjust your line of credit, if needed.

For example, if a small business is looking to purchase a new building, a community bank will help the business implement a savings plan to address the necessary down payment and other associated costs. With an intimate understanding of your needs, community banks develop a long-term financial plan best suited to help you achieve your business goals.

Obtaining small-business financing is challenging but attainable — with the proper preparation and approach. Partner with a small-business lender who will provide you with the personal assistance necessary to position your business for maximum success.

Jane Amato is a vice president and commercial loan officer at Peoples Security Bank & Trust. She can be reached at jane.amato@psbt.com

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