What types of small businesses are best positioned to get loans today?
Not surprisingly, Banks now have to be extra-diligent about their lending practices, as many small business have recently felt, sometimes that feels like it means, ‘no more lending, period.’ However, banks as well as the US Government are strongly supporting lending to small businesses.
Here are the types of companies with the best shot at getting a loan:
• Companies that have been in business 3 years or more
• Companies that operate in a B2B environment – selling to other businesses rather than to consumers
• Companies that can also demonstrate strong personal credit history
• Companies that are selling to the US Government – Government contractors with more than just 1 contract
For companies that have less than 3 years experience, exceptions can be made – for example, companies that are ‘professional groups’ – for example: accountants, doctors, dentists, lawyers, or industry experts – are often exempt.
And additionally, companies that have been in business for at least 1 year can apply for SBA lending.
What types of small businesses will have a harder time getting a loan today?
Again, not surprisingly, companies that are in cash businesses, for example retail, will have a harder time getting a new loan – banks are still weary of the consumer’s spending behaviors – something we can all relate to!
It bears repeating, there are exceptions, and companies that can demonstrate a strong personal credit history, self-invested positions, and succession planning will have a better shot at getting a loan, even if they are not in the best positioned category.
How long does it take to get a loan?
This depends, of course. However for small amounts, for example from $10-$50k, a decision for a loan can be made within 72 hours. For loan amounts between $50-$100k, a decision can take between one week and 10 days, and between $100-$250k, it can take up to two weeks.
For loans up to $2M and then between $2M and $10M, each application’s timeline will be different.
What documents are required to get a small business loan?
The best thing a small business can do is to always keep its finances in order so as not to scramble to put them together when cash becomes tight. A bank will always ask you for the following documents, at a minimum. Best to have them ready!
• Business and personal tax returns
• Business financial statements
• Personal financial statements
What are the biggest trends you are seeing in small business lending?
Two of the biggest trends that this local bank has seen are:
1) Individuals leaving big companies such as law firms, consulting firms, etc. to start their own Government-contracting companies
2) Small businesses that wait too long before calling on the banks for a loan – remember, think ahead to avoid the cash crunch.
What do you wish your customers knew about small business lending and Chevy Chase bank in particular?
If business is good, now is the time to get a line of credit, even if it’s only a small one. It will be much easier to extend that existing line of credit when you need it, instead of having to establish one when business is down. This is one of the most commonly made mistakes by small businesses.
Don’t forget that your local bank is here to help you. Chevy Chase bank is a big member of the community and can offer valuable resources to a growing small business – from offering direct deposit services in lieu of payroll services, to many merchant services such as online ‘shopping cart’ services, point-of-sale transactions, and many more.
A strong relationship can also drive better lending – banks are going to be more likely to lend to customers that they know, and who have an established record of banking with them, even if that customer doesn’t meet the “best positioned” profile!