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"...if they qualify."

by Guest Blogger on 01-28-2010 07:04 PM - last edited on 01-28-2010 07:31 PM

As a member of the Ohio SBDC team, I don’t work in a silo. I work with an amazing team of people who are true experts in their fields and have an undying passion to help others achieve their business goals. So sometimes I think it’s good to share the wealth; to share the thoughts and experiences of some phenomenal individuals with you and opportunity to be heard with them. Here, be enlightened by Michael Bowers*, Regional Director of the Ohio Small Business Development Center at Columbus State Community College. Michael’s 10 year career in banking and financial services, 3 years experience as the Executive Director of the Columbus Venture Network, leading the organization’s efforts to increase the level of equity financing available to early stage businesses and 8 years as the current Regional Director of the Ohio SBDC helping prepare entrepreneurs to seek and obtain equity financing will provide you will invaluable insight into understanding how to fulfill your business’ funding needs. This is a recent post from Michael’s Ideas to Deals*: The Innovation of Small Business and Entrepreneurship blog…

 

I think that all banks across the country have gotten together to come up with a common response to the question "Are you lending to small businesses?"  The response I have heard in almost every instance is "We're lending if the businesses qualify."  What?!?

 

The last two years have been a perfect storm of tightened credit standards and the economy negatively impacting small business P&L statements.  The result… fewer businesses "qualifying" for credit. 

 

Here are a few things you MUST know if you are going to be able to break this credit strangle hold.

 

  • Know Yourself: It is critical that you know your business' financial situation.  Get your financial statements up to date and really know what the situation is with your business.  Look at your cost structure and make sure you running lean and efficiently.  Know that your cash flow statement, speaks the loudest to bankers, you need to understand that inside and out.
  • Know Your Needs: Don't go in with a blanket loan request.  A key to seeking financing is the "Source and Use of Funds Statement".  You need to breakdown your needs (uses) and have a corresponding plan to address those needs (sources).  Also, know that banks lend for stuff.  Expect to get push back on working capital requests.  Expect questions and know how to address them before they are asked.
  • Know Your Future: What is the plan going forward?  Have you developed a strategic plan that includes a strong SWOT (strengths, weaknesses, opportunities, threats) analysis?  This is critical to paint the picture of the future for your business.  More than likely things have been rough the past year or two so you need to focus not so much on the past but the future.  You need to show how the requested financing will positively impact your financials going forward.  I would focus on top line growth and cash flow.
  • Know Your Bank: You need to know if your bank is "really" making small business loans.  Contact local entrepreneurial support agencies like the SBDC or SCORE.  They deal with banks all the time and they know who the players are and who the pretenders are.  Also, maintain a relationship with various people at your bank.  Talk to them about how things are going.  Informal "How's business" inquiries will often yield more info than you would expect.
  • Know Your Banker: Now I'm talking about the actual person you are applying to.  You need to make them look good to their supervisors.  Give them a deal they can understand and get behind.  Don't make it complicated to understand.  Be clear how you are going to deploy the funds and how the funds are going to make your business successful (and able to pay the bank back).  Your banker needs to be your advocate.  Try to make your request as close to the decision maker's level as possible.  This will reduce the number of people that need to understand your business and deal in order to get an approval.

I know it is tough out there.  I am hearing that bank credit won't get back to pre-recession levels until 2011.  You don't need to wait that long.  Know how to play the game and work within the banking system and you "will qualify".  

 

 

 

Tonya Head Shot.jpgAbout the Author: 

 Tonya Wilson is the Program Manager for the Manufacturing & Technology Small Business Development Center at Columbus State Community College. You can also find Tonya on twitter at @TonyaWilson

 

*Note: Hyperlink directs reader to non-government Web site.

Message Edited by TonyaWilson on 01-28-2010 07:15 PM
Message Edited by TonyaWilson on 01-28-2010 07:19 PM
Message Edited by TonyaWilson on 01-28-2010 07:31 PM

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About The Industry Word
The Industry Word brings together a lineup of notable small business professionals to share their small-business expertise with Community members. The Industry Word is unique in the Business.gov Community as it includes contributions from professionals outside of government. As contributing members of the Community, guest bloggers will cover a range of topics from franchising and marketing, to technology, legal, tax and accounting. All views and opinions expressed on The Industry Word blog are those of the individual contributors and do not necessarily reflect those of the Business Gateway Program Office, the U.S. Small Business Administration, partner agencies, or the Federal government.
About the Author
  • Steven Roll is a Senior State Tax Law Editor with BNA Tax & Accounting in Arlington, Virginia.
  • Barbara is a respected corporate speaker, contributing editor, author of more than a dozen books from major publishers, sought-after expert media source, newsletter publisher and, more than ever, a trusted advocate for small business owners. Barbara is passionate about helping the small business community and fostering the entrepreneurial spirit. She enjoys serving as a true small business expert, teaching people how to start a business and expand their current enterprises.
  • Bill Gormley is a former senior federal executive. He has held a vast range of government contracting positions from Contract Specialist to Contracting Division Director to Assistant Commissioner of the General Services Administration (GSA). He is recognized by both the federal government and industry for his proven leadership, and is a frequent guest speaker at GSA-sponsored events. With years of hands-on government contracting experience, Bill now provides invaluable advice and insight to clients looking to sell their services and products to the government. You can reach Bill directly at the Washington Management Group (www.washmg.com).
  • Craig is a journalist and consultant based in Washington, D.C. Craig has contributed to a host of publications about technology and media, including the Washington Post and National Journal. His blog is called Municipalist and focuses on use of the Web by government, local and federal, to engage citizens. Craig's home site is craigcolgan.com and his consulting firm is PotomacPlanet, which he operates with his partner and wife Hilary LaMonte.
  • Dawn is an award-winning small business journalist who helps policy makers understand the impact of their work on microbusinesses and helps microbusiness owners to sort through the hype and the spin to find out how events in the larger world will impact their firms.
  • Since 1990, The Libava family has been helping future entrepreneurs with their dreams of business ownership. Joel Libava, Franchise Selection Specialists Inc. 2nd generation President, brings real world franchise industry experience to his clients, coming from a franchise management background in the automobile and restaurant and hospitality industries. Joel shoots from the hip, and you'll find his unique take on the world of franchising refreshing, and sorely needed.
  • Federal Employee - Business Gateway's Financial Manager
  • The NYS Small Business Development Center Research Network has been providing reference services to the advisors of the NYS SBDC and their entrepreneurial clients since 1991. It has five full-time librarians that has . The blog can be found at sbdcrn.blogspot.com The writer of this post, Roger Green, has been at the SBDC since October 1992, after returning to graduate school in midlife. Previously, he worked as a manager of a small business - a comic book store - for eight years. He blogs pretty much daily at rogerowengreen.blogspot.com and elsewhere. He tweets very irregularly as ersie.
  • Rieva Lesonsky is CEO of GrowBiz Media (www.growbizmedia.com), which helps corporations, government agencies and other organizations identify, understand and connect with SMBs, and provides information, products, services and resources to help SMBs build their businesses. Lesonsky is also an Editor-at-Large for AllBusiness.com, a Contributing Editor for Microsoft Office Live Small Business, and a small-business blogger for The Huffington Post and can be seen regularly on MSNBC's Your Business. Lesonsky has written several books about entrepreneurship and small business. In 2009 she was named to Folio magazine’s annual Folio: 40 list of top influencers in the publishing industry.
  • Anita Campbell is the Founder and Editor in Chief of Small Business Trends, an online publication touching over 250,000 small business owners each month with news, tips, product reviews, book reviews, and trend analyses. Each week she conducts a podcast interview of a small business expert. Anita is a former corporate attorney who loves running online businesses. Her articles appear around the Web on her own publications, as well as a variety of websites where she guest writes. You can also find Anita on Twitter: @smallbiztrends
  • President and founder of Palo Alto Software, founder of bplans.com, co-founder of Borland International, author of books including 'the Plan-as-You-Go Business Plan' and '3 Weeks to Startup' (Entrepreneur Press, 2008) and conceptual author of Business Plan Pro. Baby boomer ex-hippie Stanford MBA, married 39 years, father of five.
  • As a Certified Program Planner and the Program Manager for the Manufacturing and Technology Small Business Development Center (MTSBDC) at Columbus State Community College (CSCC) I create, coordinate and promote programs and events to inspire, educate and engage individuals in our region who wish to start or grow a small business. I draw on my background in training and development, multimedia production, organizational management, marketing and communication daily to brand and market the SBDC. The SBDC, MTSBDC & ITAC (International Trade Assistance Center) provide free one-on-one business management counseling to small business owners and low to no cost training. You can also find Tonya on twitter at @TonyaWilson.
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