Securing a Small Business Loan

Bundle your loan application the same way you bundle your services to get lenders to give you a bundle of cash or credit.

by Mark E. Battersby

When it comes to securing needed capital, few ISP owners can afford to leave any stone unturned. Whether your ISP is looking for startup funds or searching for money to expand an Internet operation, your ISP may be a bank manager's perfect candidate to be awarded a small business loan.

Although a small business loan may not be an ideal source for startup capital, banks can provide short-term funds that might be just the fuel your ISP needs to grow its business. Banks make money by selling their services. Remember, your ISP is the customer now — there are many services that a bank can provide your fledgling business operation.

Banking on banks
Today's banks offer a wide-range of services and are continually pressing government regulators for the rights to offer even more. Banks can prepare the payroll for your ISP operation, buy your accounts receivable, collect your overdue bills, earmark a line of credit that you can draw on as needed, process your credit card receipts, rent you space or time on their computers, and a whole lot more.

Remember, banks charge fees for everything from checking accounts to excessive deposits. The bank's other services are no exception. Make sure you understand the details of outsourcing business operations to your bank.

At the same time, the very same banking services can also provide an excellent negotiating opportunity for an alert ISP owner. That's right, both interest rates and the terms of the funding you're seeking are negotiable regardless of the size of your business.

While the lowest interest rates and least restrictive terms are naturally reserved for the safest transactions and the biggest customers, any ISP that utilizes or can be expected to eventually utilize a bank's other services, possesses leverage that can be applied to lower interest rates on a small business loan and avoid many of the restrictions that could accompany the funding.

Finding funding online
The Internet not only offers online banking and bank services, it also provides an opportunity for every ISP owner to apply for the capital they require online. Better yet, the Web also offers the luxury of putting your financing needs out onto the Internet. Imagine having many banks, even "brick-and-mortar" banks bidding for the privilege of loaning you the money your ISP operation needs!

Online financial services are not limited to banking and lending. They can be a source of information about the many different types of financing available to your business. Online resource could help you decide which type of financing is right for your situation and even help you compare the "cost" of many financing alternatives — all online. A full-service bank that is online probably has more technical expertise than the average small-town bank. An online bank may better understand your ISP business and grasp its financing needs. More importantly, only you can determine if an online bank can offer your ISP the funding and services that it requires at this stage of your growth.

Bundling business needs
The route most ISP owners are familiar with involves submitting a completed loan application and submitting it to a faceless clerk at a neighborhood bank. Unfortunately, the ISP business owner who dutifully completes a loan application is, at best, limiting the available options.

At worst, the ISP operation will either secure needed funds at a cost that can only be compared to as "paying retail." Or the application will be rejected and it will be necessary to start the entire application process over again. Not many small businesses have the time available to complete all required documentation, schedule an interview with the bank manager, cross the "T's" and dot the "I's," for bank, after bank, after bank.

Whether banking online or locally, today many experienced ISP owners ignore the loan application altogether — often ignoring banks, too — while getting the funding they need at a price that they can least afford.

The tool small businesses currently use to secure funding is known as a "loan package."

The loan package takes many different forms and shapes and contains widely varying amounts of information. Distilled to the lowest common denominator, the standard loan package provides all of the information usually contained on a typical loan application. Additionally, a packaged loan application presents basic business data, plus any relevant information designed to influence, reassure, and even educate the potential lender.

With a loan package in hand, the ISP owner can approach any banker with confidence that his or her request will receive the attention that it deserves — even if the banker knows absolutely nothing about operating an Internet service.

Best of all, regardless of how exotic, unusual or risky, your business plan is, you are not limited to making your request at one bank — or even a number of banks. Your packaged loan proposal is also portable — it can be submitted electronically.

The secret to securing business loans is to understand the type of financing your business requires and who is best suited to provide that financing most economically. By using a loan proposal, you help any potential lender understand your business and its financing requirements. And remember, good things come in small packages.

— End

Online resources:

BankRate.com: Hodgepodge of information on financing, timely reminders and, of course, a source of rates for online finance, Internet banking deals and local bank rates and terms.

Business.com: Contains an extensive section on commercial finance. Not only does it provide information and links to industry sources, direct links to a number of direct lenders and financial institutions is provided.

E-How.com: Boasts that it provides "more than 15,000 solutions," but many of them solutions to problems you didn't even know that you had. Extremely basic, only provides short answers to a number of financing dilemmas.

CCH Toolkit: Technical publishing giant, CCH's site for the Business Owner's Toolkit, offers basic and well thought-out information on the various financing options available as well as details on establishing banking relationships. Offers a number of downloadable templates and worksheets to make the financing project easier.

Business Finance.com: Bills itself as the "Largest Network of Business Capital Search Engines." Visitors are offered the opportunity to search for capital, download a "Successful Funding Workbook" or seek loan assistance from the US Small Business Administration. Commercial finance, government loans, investment funds, lease financing, and more.