“I’ve been delighted today to see a lot of optimism, but we don’t want to neglect the fact that a lot of businesses have been hit hard” by the recession and decreased access to capital, National Association of Women Business Owners President and CEO Diane Tomb said during a panel session on capital access at America’s Small Business Summit in Washington, D.C. There are many tough stories out there about businesses that had good credit and a good relationship with lenders but then couldn’t access credit.
Being able to access capital is a huge issue for small businesses, and it’s not one that applies only to companies in the startup phase, said panelist Roz Alford, founder and co-principal of ASAP Solutions Group. Every stage of growth for a business requires funding, so it’s an issue that keeps coming up.
In many cases, it seems the biggest restriction is a lack of education about capital access, Alford said.
“The best time to get credit is when you don’t need it,” said panelist Laura Yamanaka, founder and president of teamCFO. You need to be prepared when you turn up to ask for credit. You should never show up at a bank and be surprised by its response to your loan application.
You also need to know the rules for loaning from a bank because they changed in recent years, Yamanaka said.
Banks want business owners to demonstrate they have a steady cash flow, that their business makes enough money to to repay debt, said panelist Patty Tuttle, senior vice president of Wells Fargo Mid-Atlantic. They also want to see that the business owner has a realistic outlook and a plan to deal with obstacles. In addition, banks will look at the business’ other debt and record of repaying.
Developing a relationship with your banker is an important part of getting a loan, Tuttle said. You want to make sure your banker knows your business plan and goals. That will help the person help you do what it takes to get necessary funding. That help often includes assistance to improve a business’ creditworthiness.
You need to find a good banker and get to know the person so well that he or she knows you in line at the grocery, not only when you show up at the bank to talk business, Yamanaka said.
Standard bank loans aren’t the only way for businesses to secure money. Loans backed by the Small Business Administration can be easier to secure and might carry more flexible terms, said Jeanne Hulit, associate administrator for the SBA’s Office of Capital Access.
Not all banks make SBA-backed loans, so you want to find one that does, Hulit said. You also want to find out which banker works on SBA loans because that’s the person you need to get to know.
A newer option for securing capital is crowdfunding, which involves soliciting investors via the Internet, said Andy Guggenheim, counsel for the House Committee on Small Business. Recent legislation laid out the framework for this, and the Securities and Exchange Commission is working out details to regulate it.