News Column

Small-business Loans: How to Better Your Chances

June 10, 2013

Joyce M. Rosenberg

small business loans

Thousands of stunned small-business owners call Dun & Bradstreet Credibility Corp. each week after they're turned down for a loan. Jeff Stibel, CEO of the business credit reporting company, has a message for them.

Don't blame the bank.

Instead, he says, find out how you contributed to that rejection and start working to improve your company's credit rating so next time, the answer will be "yes."

"There is so much you can do, and should do, before you need a loan," he says.

Dun & Bradstreet Credibility compiles credit reports on small businesses, which banks can buy to help make their lending decisions. In a recent conversation with The Associated Press, Stibel talked about the continuing sluggishness in bank lending to small companies.

Lending rose modestly in April, according to the Thomson Reuters/ PayNet Small Business Lending Index, after falling the first three months of this year. Stibel agrees that banks can make it difficult for small businesses to get loans. But he argues that owners bear some responsibility when they're rejected.

Many small business owners go about getting a loan all wrong, he says. They apply to banks that aren't likely to approve them. When they apply, they haven't made sure their companies' finances and credit ratings are solid. And they haven't taken the time to cultivate a relationship with a banker who will be sympathetic.

Stibel knows that business owners aren't helping themselves because they call Dun & Bradstreet Credibility after banks reject loan applications and tell them to find out what's in their business credit reports. The files are similar to the personal credit reports on consumers that are compiled by reporting agencies such as Experian and Equifax. They include information such as a company's payment record, how much debt it's carrying and the number of loans it has applied for.

"We talk to over 20,000 businesses a week and a huge percentage of them don't even know they have a business credit file. They think that all they have is a personal credit file," Stibel says.

Sometimes owners don't see their business credit report until they're sitting with a loan officer in a bank branch, Stibel says. For bankers, that's a red flag.

"They'll say to a business owner, 'I'm trying to believe that I can trust you to pay your bills and that I can entrust money to you and you'll be a good corporate steward and pay me back - but if you don't know what your credit profile looks like, then how on earth can I lend you money?' " he says.

Owners can get copies of their files from reporting companies including Dun & Bradstreet Credibility, Experian and Equifax. They also should study their personal credit reports, which bankers consider when making loan decisions.

Another roadblock: Many businesses aren't savvy about the application process, Stibel says. Owners think they can walk into a bank, fill out an application and presto, get a loan. These days, that's a good way to get turned down.

"Before they think about any credit, they should do what they do before they start a business," Stibel says. That includes writing a formal business plan that explains how you will spend the money you want to borrow.

Originally published by JOYCE M. ROSENBERG AP Business Writer.

(c) 2013 Tulsa World. Provided by ProQuest LLC. All rights Reserved.




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Source: Copyright Tulsa World 2013