Michael Lockwood, President of TEQlease Capital, wrote an article for Up and Running Blog that was published today titled “5 tips to getting small business financing “. We are including an excerpt from that article below.
It’s no secret that small businesses have had a hard time getting financing approval for nearly four years. But according to the latest Wells Fargo/Gallup Small Index –a quarterly survey of small business owners nationwide – small business owners are now more optimistic about getting credit than they have been since July 2008. According to the report, 28% of U.S. small businesses plan to increase their capital expenditures in 2012, the highest rate it has been in four years. And perhaps most importantly, 24% of small businesses have already started increasing their capital expenditures for 2012.
With optimism for gaining financing spreading, the question for many is how to best approach lenders to maximize the chances of getting a credit approval. Here are five keys for small businesses to get approved.
- Demonstrate that your business generates steady cash flow. Cash is still king and is also a key predictor of a business’ health and prospects for the future. By being able to demonstrate you have ample and/or steady cash flow, you are ensuring to potential financers that you have plenty of money to pay creditors, employees and others on time.
- Maintain a manageable debt load. Debt load is the amount of debt that is carried on your balance sheet. You need to be able to demonstrate you can not only handle your current debt load but also the additional debt repayment your proposed financing will cause. If you want to incur the debt for expanding your business be prepared to demonstrate why this additional debt will be beneficial.
- Sustain a positive payment history. One of the most important factors for any financer to weigh is a business’ payment history. A financer needs to see that a business has a record of paying down debt, and on time.
- Prove business judgment. Potential lenders want to be assured that you anticipate potential challenges and have a plan in place as to how to address these challenges. Furthermore, lenders are also interested to see that you have the management in place necessary to overcome any obstacles that might come your way
- And of course, shop around for financing. Don’t assume your bank or the vendor will offer the best terms. Compare rates, lease terms, fees and options and use only established financing providers.
If you have any questions, please contact us.