Rid Your Lender of Hesitance

Money lending institutions tend to be overly cautious when considering loans to small businesses because there can be a high failure rate among such businesses. Money lenders tend to have a good idea of small business's success rates, and will apply such knowledge when approving or denying loans. The small business owner would be wise to study this approach, even if it may, at first glance, seem a bit discouraging.

What Lenders Want

Most lenders require the following from their applicants:

• Cash flow sufficient to cover payments
• Show a track record of profitability (from another form of business)
• Proof of financial reserves and personal collateral sufficient enough to solve unexpected problems of a business

Understand the Lenders

According to Nolo (www.nolo.com), use a skeptical attitude as a counterweight to your optimism in order to get a more balanced view of your business prospects. What is it that makes you think you will be one of the minority of small businesspeople who will succeed? If you don't have specific answers to this question, you could be in trouble. Most new businesses do fail, and the majority of surviving businesses do not genuinely prosper.

Other Factors

• Be sure that your credit report is good (and accurate).
• Compose an Executive Summary that concisely describes your business plan.
• Apply for the correct loan for your needs, i.e. a line of credit for seasonal ups and downs, and a loan to make one-time equipment purchases.
• Demonstrate how your business will make profits. Lenders will want to know what you plan to use this money for.

For more information regarding small business startups, visit the Small Business Administrations main site at www.sbs.gov.