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Six Steps to Winning an SBA Loan

The recession did have an upside:

Many of the fundamentally sound small businesses that began to rebound in 2010 are now in a much better position to get financing for expansion.

“The recession demanded leaner operations and creativity while decreasing competition,” says George Harrop, a successful entrepreneur and managing partner of CapitalSource’s Small Business Lending Group ( “Small business operators have benefited from this operational rigor. They can now show improving trends that are critical for securing a loan.”

The U.S. Small Business Administration supported more than $12 billion in lending to small businesses and entrepreneurs in 2010. Harrop says his company’s loan requests have increased significantly this year.

Here are his six tips for getting an SBA loan:

Write a comprehensive business plan. The most important thing is to show why the business will be successful and how it will make money. Include market research, financial projections and profit-and-loss statements. SBA offices can assist business owners in creating a viable plan and put them in touch with potential lenders.

Manage and conserve cash flow. Business owners need to make the connection between cash flow and the work being performed. Know how long it takes to perform the task, make the product, get a part delivered from China, for example—and how long it takes to get paid.

“Sell” the business and the owner. Borrowers must sell their business to a bank just as they would to a private shareholder, only more so, since borrowing from a bank is a partnership investment with the return of a loan. Present the loan officer with a detailed résumé or list of personal accomplishments.

Be transparent. Lenders are looking for borrowers who are trustworthy. Share personal tax returns and a recent credit report, since the bank is going to find out everything anyway.

Know the SBA programs. New programs such as SBA 504 for refinancing real-estate debt can help businesses take advantage of real-estate values that have continued to decline.

Have patience. Understand the SBA paperwork requirements from A to Z. Do due diligence for potential lenders, especially their experiences with SBA loans. Being prepared will expedite the loan process.

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