Be upfront with your banker about both the good and the bad

If you and your business have a story to tell, you should be telling it to your banker — especially if you want that banker to OK a business loan.

“Businesses must be very proactive,” says David Enquist. “If you have a story to tell, be prepared to tell it.” If your story has some negatives, “be prepared to properly explain both the good and the bad.”

Enquist is a commercial loan broker, president of Business Lending Solutions, Inc., Libertyville. He knows both sides of the bank-business conversation.

Banks, at least those with capital, seem to be making loans.

“Oh, yeah. There’s money available,” answers Walt Garside, senior vice president at American Chartered Bank. “We’re looking for (business owners) as much as they’re looking for us.”

Enquist agrees that money is available, but he may be a tad less sanguine about availability. For one thing, he notes that banks generally are under regulatory pressure to rebuild their own balance sheets.

That means many banks have little money to lend.

In addition, Enquist says that federal regulators now “require banks to look at ‘global’ debt service coverage.” In the small business context, global refers to the combined business and personal financial situation of the business owner.

For example, says Enquist, “We’re still seeing applications with enormous personal credit card bills. The lender will impute how much you need to cover (those) expenses.” In other words, if your business is in good shape but your personal finances aren’t, that’s likely to be a negative for bankers.

Nonetheless, Enquist says, “Money is available for businesses that reacted well to the downturn.” If your business rebounded, be ready to explain why.

“Businesses that did well in 2010 reduced fixed expenses,” Enquist says. As an example, he talks of a business that “dropped (unprofitable) product lines and laid off staff,” actions that helped turn a marginal cash flow to strong. On the other hand, Enquist says, “If 2010 was an off year, you’ll have a hard time getting financing this year.”

Still, bankers with resources may be flexible.

“We know that business isn’t always a numeric progression up,” says Garside, whose Schaumburg-headquartered American Chartered has 15 offices. “We know things don’t always go well. (If there are problems) have a plan to make them better. We need information.”

With information, Garside says, American Chartered “can be flexible in structuring loan terms to fit the needs of a business.”

However, flexibility doesn’t translate to an automatic loan approval — or to quite the type of financing a business owner might seek. “You may need to take a step approach, accounts receivable financing for a year,” says Enquist.

Even then, Enquist adds, you’ll likely be asked for a personal guarantee of the business loan.

Ÿ Contact Jim Kendall at JKendall@121Marketing Resources.com.

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