How to Get a Small Business Loan

How to Get a Small Business Loan

Our Capital Masters experts recently hosted the first in a series of webinars. Titled ‘Financial Strategies for Today’s Market’, Rich Russakoff and Bob Hernandez covered topics such as maximizing PPP forgiveness, the reopened EIDL loan program and the benefits of a 7(a) loan. Don’t worry if you missed it, we’ve got you covered! The full webinar is available below – 

If you don’t have time to watch the full recording, we’ve condensed the information presented into bitesize chunks for you to nibble at in your own time. Today’s post is taken from the segment on what a bank will need in order to provide you with a small business loan.

Our treasury, credit and finance wizard, Bob, has been on the phone with bankers throughout the country for the past few weeks, and has learned a few things about the banks’ appetite for lending in the current climate.

The common thread amongst them all is, they’re going to want to see extremely detailed business plans. 

They’re going to want to see credible, factual, and justifiable projections, assumptions that relate to that business plan. 

They’re going to want to see that you’re able to articulate how Covid-19 has affected you as a business, what’s happening now, and what you think’s going to happen at the end of the year, as well as next year. They want to know how it’s affecting you and your industry. 

Then, they’re going to check that against what they already know for that industry by researching your NAISC code (National Industrial Classification Code).

If you weren’t cash flow positive in past years, and COVID’s made things even worse, you’re probably not going to get a deal. If you were cash flowing previously, and things stopped because of COVID, then you may be able to get a deal. Banks are always looking at historical performance to dictate future results. 

Next up, the credit analyst and credit officer are going to look at your previous trends. Are your revenues going up, down, or do they look like a roller coaster? Is your cost of goods stable? Same thing with your SG&A cost (selling, general, and administrative cost).

Finally, they’re going to look at your Earnings Before Interest Depreciation and Amortization (EBITDA). 

The key factor when applying for any loan is that you have your financial house in order. 

Credit score and things like that have their place, but that’s not really where it’s at when you’re going into underwriting a deal.

So, not only do you need to have a strategy and an action plan, but you have to show you have the people, the market, that the industry opportunities are there, and how you’re going to use the cash flow – which is why your projections are so important. Because for banks, it’s how am I going to get repaid, number one? Number two, how am I going to get repaid? Number three, how am I going to get repaid?

If you can provide all of the above, then the bank has a certain comfort level to go with. 

A successful loan application package is quite an undertaking. It needs to include a compelling executive summary on how you’re going to use the money, where the business is now, what opportunities are available, and how you’re going to pay back the loan. It will also need a clear company section, who you are, what you do, and all company milestones. 

If you’d like assistance building your loan package, get in touch to discuss working directly with our experts using our white-glove process and get your business the loan it needs.

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Applying for an EIDL Loan Is Easier Than Buying Groceries

Applying for an EIDL Loan Is Easier Than Buying Groceries

I resist any business-related activities on Saturdays and Sundays. But last Saturday, I promised Moe we would commit the time to applying for an EIDL loan. We filled out the forms, which was easier than placing an online order at our favorite food markets. The form requires you to state your corporate business status and answer two simple financial questions. What was your revenue for 2019 and what was your cost of goods?

By Monday morning, we received an email from SBA with our process number and that we were pre-approved for a specific amount. It’s a good number. Our choice was to accept it, ask for less or apply for more. We chose to accept, because it is a loan, and you have to pay it back. EIDL loans are capped at $150,000.

By Tuesday morning, we received an email stating the loan amount was approved, subject to our agreeing to the six pages of terms and conditions. We read them, signed the document, clicked the approval box, and within hours received another email stating the processing for our payment had begun.

We also received $2,000 that we won’t have to pay back. The rule is $1,000 for each full-time person in the business.

The terms are for 30 years and the interest rate is 3.75%, and we don’t have to make our first payment for twelve months.

If you own a small business and have not applied for an EIDL loan, I urge you to consider applying. Accepting the loan will not affect your ability to receive any other funding because it is a disaster relief loan.

I shared this with two of my clients today and they were off to the races.

Make today the day you apply for an EIDL if you own a business.