How to Boost Your Chances of Getting a Small Business Loan

Are you seeking financing for your small business? A report from the SBA’s Office of Advocacy has some interesting insights that might help improve your chances of success.

business loan

Even though the economy was picking up overall, and total business lending was slowly trending upward, the SBA reports that borrowing money was still challenging for small businesses in the fourth quarter of last year. Overall, though, there’s promising news. Small business loans totaled $597.8 billion in the fourth quarter, and the value of small business commercial and industrial (C&I) loans increased for the first time in seven quarters. Bankers saw increased demand for these loans—the highest since early 2005—and they also eased their terms a bit.

Here’s what’s interesting to me: The SBA reports that micro C&I loans (those for less than $100,000) accounted for most of the growth in small business lending. With smaller loans easier to get, how can you cut your costs to shrink your loan amount and improve your chances of getting financing?

Here are some ideas:

Save on technology. You can slash your software costs with free (or almost-free) in-the-cloud tools that do everything from tracking expenses and billing clients to managing projects. Check out SmallBizTechnology, as well as TJ McCue’s many reviews on this site, for some good suggestions.

Avoid hiring. Many entrepreneurs assume expansion means adding to the payroll, but these days, smart entrepreneurs keep HR costs to a minimum by outsourcing to independent contractors wherever possible. You’ll not only save on the cost of benefits and payroll taxes but also be able to work more nimbly, adding or dropping contractors as business demands. (Make sure you’re clear on the IRS’ definition of independent contractor vs. employee to avoid headaches at tax time.)

Use social media. Marketing, PR, hiring, networking and other costs associated with business growth can be slashed or even eliminated with wise use of social media. Do most of your marketing with Facebook, Twitter or LinkedIn. Use social media to spread the word about job openings at your business (instead of taking out costly listings on job sites). Contact the media directly through their blogs or Twitter accounts, instead of sending press releases into the ether. Network online with influencers in your industry—without attending costly conferences or shelling out plane fare to travel to events. Read Lisa Barone’s great posts on this site and you’ll get tons of tips on marketing with social media.

Improve your cash flow. You’d be surprised how much money you can free up when you get your cash flow in order. Are your customers paying late? Put systems in place to follow up immediately and get them on track. Use electronic billing and payment to streamline and speed receivables (and save money on printing and mailing bills). Negotiate better rates with vendors if you pay early or in cash. Use QuickBooks or other business accounting programs to monitor your cash at all times.

Put these cost-cutting tips into action, and you’ll be able to slash the amount of money you need to start or grow your business. Ask for less, and you’ll have more chance of receiving it…at least, that’s what the SBA’s statistics seem to indicate. Good luck!

Loan Photo via Shutterstock

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Rieva Lesonsky Rieva Lesonsky is a Columnist for Small Business Trends covering employment, retail trends and women in business. She is CEO of GrowBiz Media, a media company that helps entrepreneurs start and grow their businesses. Visit her blog, SmallBizDaily, to get the scoop on business trends and free TrendCast reports.

18 Reactions
  1. Great info Rieva. It sounds like there’s some promising info from the SBA too. Technology, outsourcing, and social media can really save costs when used properly. Thanks Rieva.

  2. It’s kind of sad that NOT hiring would improve the chances of getting an SBA loan. With such an emphasis on job creation this seems a bit counterproductive.

  3. Thanks for the tips, Rieva…

    I agree; improving cash flow via the smart use of technology for billing and tracking etc. is well…smart!

    The Franchise King®

  4. Rieva

    Great info on small business lending. At we see quite a few borrowers get turned down for larger jumbo loans as they do not possess the means to be approved for such loans. We have told borrowers to lower loan amounts to see what kind of response they will get. We have also told our lenders however to not ignore larger loan requests as maybe the borrower will accept a lower loan amount just to get something.

    I will say that some of the strategies above are much easier said then done. Hiring independent contractors can often times be a very large waste of time and money as contractors will disappear on you and not complete the work you have paid them to do. They even might be working with a competitor or steel valuable company information. I feel that going though the hiring process and truly finding an employee that fits for your company can be a decent win. I do however find value in independent contractors as long as you have a trusting working relationship and a defined job description that keeps the contractor on a straight and narrow path.

    I find it exciting and motivating that we are seeing these types of numbers in the business finance space. We are not back to normal yet but I think we are on our way!!