6 Tips to Improve Your Odds of Getting a Small Business Loan

6 Tips to Improve Your Odds of Getting a Small Business Loan

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Every small business owner needs a little extra help every now and then. Improve the chances of getting approved for your small business loan with these tips.

Many small businesses rely on outside capital to fund operations, purchase new equipment and take advantage of growth opportunities. Banks are often the first place such businesses turn to when they need financing.

What can you do to improve your chances of success when applying for a small business loan? Cadence Bank Small Business Relationship Manager Brandon Thomas offers the following six tips:

1. Establish a strong relationship with your small business banker

“This is my number one piece of advice,” says Thomas. “Your banker will be your biggest advocate and fight hard for you if he or she knows your business well and has a good relationship with you.”

The process of building a relationship with your small business bank starts long before you actually need to borrow money. Therefore, make a point of getting to know your banker and telling him or her about the nuances of your business: your product and service mix, current industry trends, competitive landscape, and financial goals, for example. This will help your banker be better prepared to analyze your loan request when the time comes.

2. Be flexible with your loan request

Thomas says that banks often approve smaller loan amounts than those requested by small business borrowers. “Sometimes businesses need to start out with smaller fish and work their way up,” he says. “So don’t be surprised or disappointed if this happens.”

According to Thomas, the bank’s goal is to loan small businesses enough money to meet their goals without putting undue financial stress and strain on the business. “Also, we want to see that the business owner knows how to handle debt,” he says. “If the owner demonstrates that he or she can manage the loan properly, we may choose to increase the loan amount later.”

3. Manage your business & personal credit responsibly

Not surprisingly, banks are going to take a close look at a business’s credit history before approving a loan request. But many small business borrowers don’t realize that banks are usually just as interested in the personal credit history of the owner and principals.

Thomas says that the way owners manage their personal credit is often a good reflection of how they will manage their business credit. “So take steps to boost your personal credit score, like paying your bills on time and not carrying too much credit card debt,” he says.

In addition, the bank may require a personal guarantee of the loan on the part of the owner or principals. “This is another reason why a bank will be interested in your personal credit history,” says Thomas.

4. Present accurate & up-to-date financial statements

The bank is going to scrutinize your business’s financials to determine if your company has both the cash flow and financial wherewithal to service the debt without it causing other financial problems. Thomas says the most important financial statements for a small business loan request are:

  • The balance sheet
  • Profit and loss statement (or P&L)
  • Accounts receivable aging report

“Statements should be presented in a professional format — like Quickbooks, for example — and not just scribbled on a legal pad," Thomas says. "These should be kept up to date and prepared by a qualified CPA or bookkeeper."

5. Be thorough in completing your loan application

If the bank requests certain information, forms or statements as part of the loan application, it’s doing so for a reason, says Thomas. “So be sure to include them. Failure to fill out the application completely and include all requested information will slow down the process and possibly lead to frustration on the part of the business borrower or the banker."

6. Match the loan to your need

Banks offer several different types of small business loans, including lines of credit, term loans, SBA loans and equipment loans. Thomas says your banker will usually determine which type of loan would be best for your particular financing need based on the information submitted in your loan application and any necessary follow-up interviews.

He acknowledges that not all small business loan requests are approved. “If you aren’t approved for a loan the first time around, don’t be discouraged,” he says.

“Ask your banker why the loan request was denied and what you can do next time to improve any weaknesses in your loan application. In other words, try to learn from your mistakes to improve your chances for success in the future.”

These tips will help you on your journey to more capital and success in business.

Learn more about small business banking and the Cadence Bank products and services that can help.


This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.


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