Tips for Getting and Using Small Business Credit

Be straightforward and honest in dealing with lenders. Stress your strengths, but admit your weaknesses. If you’ve had credit problems in the past, be open about discussing what went wrong and how you corrected the problems.

Be prepared with a business plan. A business plan is your best representative for communicating your plans and expertise to a loan officer.

Understand what you are getting into. Make sure that you clearly understand the repayment terms and the cost of the credit that you’ve chosen.

Be patient. Not everyone will get a loan the first time out. If you don’t, make sure you understand why you did not qualify and what you need to do in order to be approved in the future.

Understand the risk associated with borrowing. You will be expected to provide security for your loan which may mean putting your personal assets at risk.

Action Items

  • Application

  • Loan amount

  • Statement of purpose for the loan proceeds (itemize usage of funds)

  • List start-up expenditures (e.g., capital purchases, start-up expenses, licenses, deposits, fees)

  • Equity injection from owner: What amount, source and type?

  • Opening/beginning balance sheet of business

  • Month-to-month cash flow projections for twelve months with two years of quarterly projections

  • Justification of line item assumptions (i.e., What is the basis for your sales figures?)

  • Proforma balance sheet and projected profit and loss statements for three years

  • Break-even analysis

  • Resumes of key people

  • Business plan

  • History and description of industry

  • Your company: why was it formed?

  • Competition; or what makes you unique?

  • Market study and market strategy

  • List of current obligations (both business/personal)

  • Number of jobs created or retained

  • Collateral offered to secure loan

  • Secondary source of repayment

  • Personal credit report (Your lender will have access to this information. If you wish, you may request your credit report.)

  • Business references

  • Location of business