How to improve your odds of getting a loan

Q:Given the tight money environment we are experiencing, how should one go about securing a business loan for a new venture? -- Andrea F.

Answer: Getting a small-business loan is not as easy as saying you have a great idea and holding out your hand. Though it is difficult to get a startup business loan without a proven track record, it's not impossible. Here are six tips on how to improve your odds.

1. Get help before you start bank shopping.

Community small-business resources, such as SCORE and the U.S. Small Business Administration's Small Business Development Center, can be a big help when you seek funding for your business. They know the ins and outs of approaching lenders, and they can steer you to the small-business-friendly banks in your area.

2. Know what lenders are looking for.

Have on hand the information your lender needs to make a decision in your favor. Lenders typically evaluate four key factors: character, business experience, ability to repay the loan, and collateral and personal guarantee. Prepare your documents thoroughly: They should include your business plan; balance sheet; cash-flow statement; income statement; personal financial statements; personal and business tax returns; and a description of the terms and loan amount, including how it will be used, secured and repaid.

3 . Give them your business.

Show your lender that you are a good risk. Move your personal and business accounts to the bank so that it can evaluate how you manage your money. This also will give you a chance to check out the bank's loan policies and to gather the forms you need.

4. Bankers are people, too.

Get to know your bank's staff, including the tellers and loan officers. Developing a personal relationship with your bank is essential not only to help you get a loan but also if you fall on hard times. Taking the time to get to know your bankers is an important step in demonstrating your character to your lender.

5. Don't go it alone.

After you complete your research and preparation, it's time to make your pitch. Practice your presentation and take one of your mentors with you, be it your SCORE business counselor or other advocate. Either can be invaluable as you meet with your loan officer and negotiate the loan. Also, your lender may feel more confident about moving forward if you have a community business leader with you.

6. When at first you don't succeed . . .

Many entrepreneurs get turned down for funding -- some more than once before they succeed. But don't give up. Meet again with your business counselor to discuss your strategy, and talk with your banker about amending your approach. Meet with other banks until you find the right fit. Banks want your business and will work with you to find a solution. The SBA has a variety of small-business guaranteed-loan programs that might fit your business. Be sure to check them out. And, above all, be persistent.

Volunteers with the Richmond Chapter of SCORE, Counselors to America's Small Business, will answer questions from small-business owners and managers. Go to http://www.richmondscore.org and click on the link to "Ask SCORE." A counselor will respond within 48 hours. Select questions and answers will be featured in Metro Business on the second and fourth Mondays. To learn more about management issues facing small businesses and SCORE's workshops, go to http://www.richmondscore.org or call (804) 771-2400, ext. 131.