Op-Ed: How to Ensure Your Business Loan Application Gets Accepted

Posted Jun 24, 2013 by Anna Johansson
Getting a small business loan can be a terrifying part of seeing your dreams come true, so it's important to take every effort to pick the perfect lender.
Bank of America ATM
Bank of America
Brian Katt
Obtaining a small business loan has never been particularly easy. That doesn't stop the thousands of business owners whose loan applications are rejected each week from feeling shocked, however, when application is denied. According to Jeff Stibel, CEO of Dun & Bradstreet Credibility Corp., small businesses are as much to blame as finicky banks.
Getting a loan can be a full time job
Dun & Bradstreet Credibility Corp. is a credit reporting company that focuses on businesses. The problem, Stibel says, is that companies only bother to call D&B after their loan has already been rejected. By then it's a case of too little, too late. According to Stibel, before a company needs a loan, a lot of work has to be done.
Taking certain steps to determine the factors that caused loan rejection is essential. Proactively improving a business's credit score is imperative. An even better approach is to assess the factors could result in denial and work to improve them before another unsuccessful loan application lowers your company's credit score.
A Dun & Bradstreet Credibility Corp. CEO should know; that company's job is to compile the credit reports that guide banks in making the decision to lend. As Stibel told the Associated Press, small business lending has continued to be sluggish. A small jump in April was preceded by a steady three-month decline between January and March. These statistics are already dismal, and Stibel asserts that the owners of small companies only make matters worse when they apply first and think later.
A few mistakes business owners make:
1. Applying to the wrong banks
Doing the research and looking at the numbers can make or break your application. Look for banks that dedicate at least 25 percent of their domestic deposits to small business loans. Banks make business decisions just like other companies, and many decide to reinvest in their communities by granting loans to burgeoning or small businesses.
2. Ignoring the numbers
If a company doesn't bother to keep its finances in order or make certain its credit score is good, it's asking for failure, not a loan. Stibel claims that of the 20,000 businesses his firm works with on a weekly basis, a staggering number aren't even aware a business credit file exists.
Many owners wrongly assume that if their personal credit score is high, their business score is, too -- a serious and costly misconception, but one that's easily fixed. Being familiar with the status and contents of a credit report will make a good impression on any potential lenders, because they are looking for businesses that are responsible and reliable ... in short, a business that will pay them back.
3. Neglecting to network and build relationships
Establishing a banking relationship with a potential lender is a smart step for any loan-seeking business. A relationship builds sympathy, and sympathy increases the likelihood of an approval. Banks are like people: they're far more likely to lend money to a friend than to a stranger.
4. Failing to plan ahead
Banks want to lend their money to responsible, forward-thinking businesses. Establishing your purposes for the loan and writing a formal business plan that details and articulates how it would be put to use will set bankers at ease about offering a loan, and make the company a desirable applicant.
How to find the right lender
Once a company has its finances in order, has established a plan for the cash it hopes to borrow, and researched and improved (as much as possible) its business credit rating, it's time to choose a lender. This decision may seem daunting, but a small amount of research makes it quite simple.
Learning which banks use a good chunk of their domestic deposits to finance small businesses is just the first step. Next, study the approach to lending that's taken by some of your business's top choices. Some banks are more interested in lending to a firm that can prove cash flow; others are more concerned about real estate or other assets.
Matching your company with a compatible bank is crucial. Research banks online and consider setting up informative meetings to help you decide which banks are right for the job.