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How To Get A Small-Business Loan
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Article 5: Know How Much You Need
When approaching a lender, don’t go fishing to see what you can catch. Be specific in your loan request and in your reason for needing the money.
Lenders not only expect you to detail how much money you want, but also to explain what you will use the money for, and why.
A winning approach includes a detailed request for a specific amount of money to finance specific business functions for justifiable reasons.
For example, if you determine you need $25,000 to add a part-time sales representative, that is what you should tell the lender. For a loan that size, the lender may decide your need can be met with an SBA express loan or a line of credit, rather than a long-term hard-asset secured loan. To make such a determination, the lender needs the details.
“The higher the loan amounts are, the more specific we want to get,” says Nancy Russell of Comerica Bank. “We will visit the owner in his place of business and see and hear what he’s planning.
“For me,” Russell says, “in my type of lending, it’s not uncommon for someone to say, ‘I want to buy a building and equipment and (need) working capital to expand operation.’ I want to see the site in person to make sure the building is there and what it looks like.”
Russell is likely to ask to see a copy of purchase agreements and information that shows the function of a piece of equipment to be purchased.
Similarly, Joan Earhart, vice president of Fullerton Community Bank, wants details to help guide the loan process, and the more particular the better.
“It helps us match the term,” Earhart says.
Long-term loans for equipment lasting 10 years will keep payments low and might be more practical than an annual credit line that might be paid off more quickly.
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