Q. I have a small, family-owned company, and I’m looking to expand. I’m curious about the small-business lending climate right now. What advice do you have as I prepare to seek financing to grow my business?
The most important thing, say those who advise entrepreneurs, is to have a solid plan. Whether you’re looking to start a business or grow an existing one, you need a detailed business plan and deep knowledge of your financials.
“It has to be a feasible and viable idea,” said Renee Hode of Central Piedmont Community College’s Institute of Entrepreneurship. “It has to show the banks it’s going to bring the money back so they can get a repayment on that loan.”
Know your company. Regularly review and monitor your personal credit score; consider signing up for credit monitoring.
Do your research. Know what’s in a lender’s portfolio to see if that matches your concept. Talk with your lender about traditional loans and SBA-guaranteed products.
Ask in advance. It’s always better to look for money when you don’t need it. Proactively review your balance sheet and see if there are opportunities to get a loan before you’re hurting for one.
Consider your alternatives. Always try to get two or three options when it’s time to get a loan.
What banks say
We also recently asked a few Charlotte-area banks what they consider when businesses apply for loans:
Bank of America Corp.: Cash flow is the No. 1 consideration, and collateral is also important, spokeswoman Nicole Nastacie said.
“Both of those suffered at many businesses during the recession, with decreased cash flow and lower property values affecting borrowers’ creditworthiness,” she said.
Sales also are important, because low sales can reduce businesses’ willingness to take on new loans, Nastacie said.
Wells Fargo & Co.: The bank looks for companies that are financially sound, with strong balance sheets and experienced management, as well as those in growing industries.
Financing for startups is more difficult, because they don’t have the track record to back up their request. But Wells looks for entrepreneurs with a great idea, experience and some connection in the past to what they’re trying to do in the future. Business plans – including a plan B if things don’t work out as planned – are critical, Charlotte region President Kendall Alley said.
But the individual behind the idea is often the biggest consideration, Alley said.
“There is nothing that replaces character,” he said.
NewDominion Bank: It’s difficult to lend to a company that’s highly leveraged, CEO John Hipp said. Liquidity is important, as is a proven management team, which can outweigh even a struggling industry, he said.
“For us, the biggest part is management and have they got some kind of experience,” he said. “The industry, for us, is less important.”
Park Sterling Bank: “The perfect client, we’d finance their owner-occupied building, provide them with working capital credit, and we’d bank their owners and employees,” Charlotte market President Charles Stewart said. “That’s the home run.”
The bank is looking for solid operating companies – and, while standards aren’t more rigid at Park Sterling than they were in years past, the bank requires more documentation these days, he said. Kirsten Valle Pittman