Does the SBA have a dime to spare?

Dennis Wengert, Las Vegas, Nevada — Tue, 22 Apr 2008 19:03:35 GMT

As a former business executive and owner, and now an SBA field executive, here are some other suggestions to get ready to approach a lender:

1) Pull your credit report from all three reporting bureaus (Experian, Equifax, Trans Union) and see what they say. Deal with any outstanding delinquencies, defaults and chargeoffs. Write letters of explanation for events beyond your control...but don't lie. Do this for anyone who will own 20% or more of the business. They will be required to be a signatory on the loan note...and be liable for repayment in case of default.
2) Construct a reasonable and complete business plan. Work with an SBA resource partner (SCORE, Small Business Development Center, Women's Business Center) to put your plan and financial projections together...the one-on-one help is FREE through all three organizations.
3) Construct a personal financial statement (all your assets, debts, income, etc). The bank will probably want collateral for the loan, so they need to know what you have...or don't have.
4) Gather the resumes of ALL owners (anyone owning 20% or more of the company) and senior managers. Banks lend to people...not businesses. The more they know about you and your capabilities (i.e. historical successes in business), the greater their comfort level with you.
5) Practice your presentation. You are proposing the bank 'invest' in your company. If you can't make a convincing presentation on the merits of your business plan, your experience and your contingency plans if something goes wrong, you're not ready to talk with the bankers.
6) Be ontime, be professional, be cooperative. Both you and your materials should look first rate. If you're not impressive, how can you expect to be taken seriously? If, during your discussions with the banker, you don't know a question, admit it...they can smell BS as soon as you start making it up as you go. Tell them you'll get back to them within 24 hours with the answer...and then DO IT! Respond quickly with any documents the bank requests.
7) Understand what you're up against. Bankers have raised their standards including required credit scores, better quality business plans, and higher collateral requirements. Having realistic expectations of what lenders will do right now will help temper your likely discouragement if you get rejected.
8) Be patient, but persistent. Go to several lenders and present your case. Shop your idea around. Banks will typically only deal in industries they have experience in. Contact your local SBA financial officer to get suggestions on which lenders are more likely to be receptive to your chosen business model and industry. If you're rejected by a lender, get both a referral to anothetr banker they know, and suggestions on how you can improve your presentation.

Does the SBA have a dime to spare?

Dan C, Minneapolis, MN — Wed, 23 Apr 2008 17:57:05 GMT

I am a CPA and have had numerous clients apply for SBA loans. My experience has been SBA standards are just as stringent if not more stringent than traditional loans.

Most people have the impression that SBA loans are easier to obtain and that with the SBA guarantees they will lend to those in a bit more risky situation (i.e. startups or growth). I think this is how the SBA programs are marketed, nearly all of these people are shocked and disappointed when they find out the marketing hype and reality are very different.

I still have yet to see the benefit of the SBA as typically if you meet the SBA requirements (which are really that bank's requirements) then you could get financing without the SBA, the banks seem to just push it through the SBA as additional security for themselves and will not push or recommend a loan to the SBA that doesn't meet their standards to start with. Many of my clients who obtained SBA loans would never do it again and would find other financing sources.

Does the SBA have a dime to spare?

Martin Lehman New York N Y — Wed, 23 Apr 2008 21:26:59 GMT

I agree with some of the comments from Dan C

BUT I also think that in your columns you should advise people that ther are sources out there like SCORE who can help people and make it easier and also tell them of the problems they might face. But just to critize it is not helpful. Tell them it is difficult, sure and maybe they dont have the requirements for a loan or maybe they are missing something that a SCORE counselor might be able to point out and make it possibleto get the loan or find others ways to get this loan or to find other ways to raise money.
We SCORE do this every day. Our record is terrific. Does every one get a loan of course not but when they leave a counselor they are better equipped to handle the loan or the way to start getting a loan or even told politely they are on the wrong path.

Glad to help you help others.

By the way we here in N Y see and help about 10,000 people a year and we have a great record.
Martin Lehman lehman@scorenyc.org

Does the SBA have a dime to spare?

Maria Reddick, Washington, DC — Sat, 26 Apr 2008 01:01:39 GMT

Dennis, I have done everthing you suggested without success. Martin, I was told by a local EDC, "you need less credit". I've not identified any VC's that are looking to invest in RE brokerages.

So I'm inclined to agree with Dan. My company is poised to be profitable or break even in 18 - 24 months but my credit score has gone down a hundred points since I began this primarily b/c of maxed out credit cards. I've exhausted my little bit of capital and between my cash investment in the building and the properties I'm willing to collateralize, the loan would be nearly 100% secured but I have had no success. I'm trying to decide if I'm going to push through or tell my agents I'm closing at Tuesday's sales meeting.

If either of you have any referrals in the DC area, I would welcome them. Feel free to contact me or forward me your contact information, Maria (maria@exitfineproperties.com)