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

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.