Asking your bank to show you the money.

Getting a business loan or credit has always been challenging for small businesses. The upheaval in banking – especially in the US – has made lending ever more difficult for entrepreneurs. Difficult, but far from impossible. In fact, making it harder to get financing in some ways helps out the entrepreneur in the long run – if you’re not able to get a loan or credit for your business, there might be a few holes in your plan that you may want to plug up or rethink first.


Small business banking expert, Tom Burke, says, despite all the ups and downs in the market, the basics to approaching a bank for a loan are essentially the same:

· Have a detailed but concise business plan. Understand where you want your business to go and what Plan B is if things don’t go exactly as you expect. Come up with a most-likely scenario for the success of your business as well as conservative and aggressive options – your banker will want to consider all three.

· Analyze your finances and have an accountant help you by preparing business projections that can show your financial institution how you intend on repaying.

· Make sure your personal credit is healthy too. With little else to go on, banks may look at your personal credit history, financial statements and tax returns as a good gauge of your ability to manage your business’s money.

· Demonstrate you know your business and understand the environment and industry you’re operating in.

As well, Burke says, consider the industry your small business is tied to:

“Industries tied to consumer discretionary spending [are tough]: restaurant, retail to a certain degree, service hospitality. These industries have been hit more than others. We don’t see a lot of startup manufacturing now, unless it’s a startup that’s already got government contracts.

“On the other hand, professional services is a fast-paced, growing area: medical, legal, accounting. Anything that has to do with a professional license or degree seems to be doing better.”

Finally, be honest.

“People sometimes try to hide details because they think it’ll harm their application, but it’s amazing what people may have done in their past that may not impact their loan request.”

For additional resources, check out the Government of Canada’s Canada Business Services for Entrepreneurs website and blog.

Do you have any additional concerns about getting credit? Send us your questions and we’ll be happy to try and find answers for you.

By Adam

July 21, 2010