Five Steps to Obtain Small Business Financing

Posted on November 4, 2010 by David Gass 1 Comment

There is plenty of information online about how to obtain financing, but the reality is that financing requirements and programs available are changing almost daily.  Information you read last year is not up to date and in some cases no longer helpful.

Due to the plethora of outdated information, along with the recent questions I’ve been asked about lending, I decided to discuss five steps to help you get the funding you need.

I am most commonly asked, “Where do I go to get a small business loan?”  However, that’s the wrong place to start.  The questions you should ask are:

• What are the requirements for obtaining a micro small business loan with a SBA lender?
• What can I do to improve my personal credit to meet the requirements for approval?
• Can I get what I need for my business with trade credit rather than a cash line of credit?
• Do I have a complete list of proceeds?
• Do I have a detailed business plan?

If you can’t answer these questions, you should take some time and get them answered.  Then create action steps to put yourself in a better position to get funding.

Step 1 – Learn what each of the requirements are for a SBA lender by going directly to the SBA (Small Business Administration) website and look up micro loans.  Based on what’s happening right now in the lending market, small SBA loans are the best option.

Step 2 – Pull your personal credit report from a self-monitoring service with a credit score.  If your score is below 700 visit MyFico and follow the steps necessary to improve your score.  You should set a goal of 720 or better.  Don’t worry if your score is really low.  Take the time and be willing to wait for the results, it will be worth the wait.

Step 3 – Build a business credit profile and score so you can leverage trade/vendor credit for needs in your business.

Step 4 – Write down a detailed list of exactly what you need the financing for.  If you are looking for a loan you need to have a use of proceeds. The use of proceeds details what you will use the money for.  Don’t write down “Marketing” but rather write a detailed list of what marketing you plan to do.

Step 5 – Create a detailed business plan.  A business plan is the one thing almost every small business owner doesn’t want to do because of the details involved in putting it together, but it’s also the one thing that will improve your likelihood of success by tenfold.

Taking these steps will improve your chances of obtaining funding.