We’ve already begun our conversation about small business lending, and how the field of it is growing more and more confusing as time goes on. The small business lending ecosystem is getting crowded and more confusing by the day. If you’re scratching your head wondering which is right for you? You’re not alone. We’d like to share Tony’s story, and what we did together to find the right options for him when he went looking for loans to expand his business
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Tony ran a successful laundry service business. His clients were mainly corporate and other small businesses, predominately restaurants. Tony had been growing well. As he grew, his capacity was showing some strain. His overtime hours were up, and his laundry facility was running near its max. Tony is a cautious guy, and he was nervous to try and painlessly find a loan to expand his business. He’s a smart businessman, but he has a bit of bank-phobia. He doesn’t understand all the jargon, thinks they talk down to him, etc.
The first thing we said to Tony was: “You didn’t go to school for Finance, so cut yourself some slack. They wouldn’t understand why you use detergent X for client Y, so they’re no different from you. They just have different skills” Tony agreed, and this started the process of helping him become more comfortable and at ease with the process.
What Did We Do with Tony?
It was obvious from the start that Tony needed to expand, and a loan would help his business. Tony had his business model down. He could tell you to the penny where everything was spent, and he knew and could forecast how much a volume an average client would need. Based on his current growth trends, it was pretty easy to estimate how much additional capacity he would need. All we had to do was get it all down on paper in a formal that the loan underwriters and officers would understand. The most important things to qualify for a loan are usually an income statement, balance sheet, and cash flow.
So, which lenders were right for Tony? How did we choose? Well, Tony had an established business, which was profitable and growing. He had collateral in terms of his current and future equipment. He had a good credit score, enough to ensure his eligibility.
Given these criteria, we decide to shop around the traditional bank and SBA route. Tony waited a little too long to expand so we needed the SBA process to go as quickly as possible. To do that, we needed to make sure that we had all the boxes check before we submitted the application. There are a lot of little things that can hold up an application. It’s good to have all those fixed beforehand.
Finding Loans to Expand Businesses
Tony found the loans he needed to expand. It was a little later than we hoped, but an SBA loan is never fast. Luckily, the overtime hits and capacity crunch was manageable, but we weren’t able to bring on new customers until our capacity was in place. Once we had the new equipment on-line and workers hired, we back on a growth track. Tony has since learned not to be so hesitant about getting capital that it puts him in a bind. He’s since got another loan for more equipment, but this time he did it as soon as he started to see the signs of capacity pressure.