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Nothing beats preparation for helping secure a loan

Lou Ratto

Small business owners who are seeking Small Business Administration loans to start up a business, expand a business or purchase equipment many times experience frustration in that process. These owners are experts about their particular products though may lack some of the essential knowledge in the financial aspects of their businesses.

Understanding your financial position is critical to your success. Understanding and presenting financial information to your banker is also critical.

How is that accomplished? The Boy Scout motto “Be prepared” is the answer.

There are numerous resources available to small business owners, such as SCORE, the Small Business Development Center, accountants and your local SBA office. Using these resources can provide the necessary knowledge and guidance in preparing a loan request. One of the tools you can gain from these resources is developing a business plan.

Is a business plan worth the time and effort to prepare? A written business plan can be one of your best tools, not only in preparing for a loan but equally important for operating your business. Clearly defining your strategic goals is an important step in being successful.

The business plan does not need to be a 50-page book. It just needs to be concise, factual and if projecting financial information, supported by the assumptions behind those projections.

While bankers like to see a well prepared business plan when presented with a loan request, this plan should actually be more beneficial to you as an owner. It should provide the path to follow as you strive for further successes in your business.

Other information that you should have prepared to provide with your loan request are three years of corporate and personal tax returns, a current personal financial statement, accounts receivable aging and accounts payable aging.

Remember the old saying that how much you put into it is how much you will get out of it is especially true in small business. Bankers understand and appreciate the many hours and sacrifices small business owners experience.

It should be stated at this point that obtaining an approval on a loan request will be based on qualifying for the loan within a financial institution’s and the Small Business Administration’s lending policies and guidelines. The normal lending guidelines, such as appropriate collateral, proper loan structure, financial trends and the ability to service the loan payment from business cash flow, are all critical elements in the loan approval process.

Again, being prepared can quickly remove many of those frustrations in applying for a Small Business Administration loan. As a banker, my greatest satisfaction is to see small businesses be successful and knowing that maybe I had a small part in that journey.

Small business is an integral part of our national, regional and local economy. The Treasure Valley has a strong core with our small businesses that add value to our local economy. Therefore, be prepared, continually strengthen the core values, and reap the rewards of success.

This column was written by Lou Ratto, senior vice president and southwest Idaho commercial lending manager at Syringa Bank at 3671 E. Fairview Ave. in Meridian. He may be reached at (208) 955-6352 or lratto@syringabank.com.

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