How to Get Your Small Business Loan in Tough Times

With the continuing talk of a global credit crunch many small business owners have been wondering if and when it could hit them and how it could affect their plans for the future. Whilst small businesses are generally immune from any direct fallout, the sort of nervousness seen in the market place can indirectly affect even the smallest of businesses.

During the good times there is a feeling that nothing can go wrong and so as long as business owners have a half decent idea and good security or collateral to back it up, then they have no problem in obtaining finance. But once the 'feel good factor' ebbs away then attitudes can slowly change over time.

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All is not lost though! There are still some steps you can take to persuade your bank manager to either support your new business idea or support your expansion plans. Here are some of the things you can do.

Review Your Plan or Idea

All the best plans in the world change over time as the general business climate changes. Nothing ever stays still and the businesses that survive know that their market never stays still.

Take a step back and examine whether your market has changed. Have recent events dented the confidence or purchasing ability of your target market? Will your customers be thinking twice about ordering your all-singing-and-dancing product or service? Will they no longer be able to accept your high price even taking into account your quality service? Have your costs significantly increased rendering your idea or business unprofitable?

You must not make the assumption that because your plan was viable a few months ago that it is still viable today. Be wise enough to re-look at all the underlying factors that made you come to the conclusion it was a good idea. Is it still such a good move?

Write a Business Plan

So many business owners still don't write business plans; they don't see the value obtained in exchange for the amount of time invested in researching and writing one. Even in the good times banks like to see a Plan but during times when banks may need more persuading then a Business Plan is essential.

Whilst many regard Business Plans as documents written solely for the bank this is not the case. A Business Plan must be seen as a tool which can act both as a summary for the bank and as a control and check for you. A well researched Plan will help you understand the pitfalls of your new venture; it will highlight the flaws in your thinking and potentially save you from making an expensive mistake.

Before you approach the bank commit to writing a Business Plan; it may be less painful than you think!

Watch Your Cash Flow

When the business community starts talking about downturns and that dreaded 'R' word sometimes the talk can become a self-fulfilling prophecy! Businesses can quickly decide to tighten their belts and soon your orders dry up and it takes longer for you to get paid for work you have already done. Cash becomes tight.

You need to be prepared for this. Review all your expenses. Do you really need all the 'toys' that go with running a business today? When did you last review your supplier's pricing? Are you still getting the best deal in the market? Are your payment terms very clear such that all your customers know that if your invoice says 30 days, then you mean 30 days and not 60 days!

The vast majority of business failures do not arise because of lack of profit, it is usually down to lack of cash. Cash is the life blood of all businesses and without it businesses die. Don't fall victim to this one; watch your expenses and chase the cash.

What does this have to do with getting the bank on your side? Simple. Your bank likes to see a well run account. It does not want to see an account that is under pressure and it certainly does not want to see itself returning your payments due to lack of funds. In times like this you need your bank working for you, not against you.

Talk to Your Bank Manager

If your business is beginning to suffer for many owners the natural tendency is to adopt the ostrich position - head in the sand! Problems do not go away by themselves, no matter how hard you try to convince yourself.

If your problems are beginning to affect your business then one of the first people you need to go and see is your bank manager. The old saying, 'Forewarned is forearmed' is so true. No one likes surprises sprung on them and a banker is no different. You must share your concerns and who knows, they may even be able to help you!

Hiding away from the Bank is no solution. A lack of facts or being kept in the dark is a sure way of creating panic and this can lead to incorrect and disastrous decisions being made. Avoid this by talking and informing.

Banks can be known for making life tough but you have a part to play. Make it easier for your bank to support you by providing them with all the necessary information they need and don't forget that you have your part to play by taking the right decisions for you and your business.

Robert Warlow

Small Business Success

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