Lendio – Making small business loans simple.

Mike: Hey everyone, it’s Mike Sullivan and this is MO.com. Joining me today is Brock Blake of Lendio. He’s our small business expert, and Brock is here to talk to you about small business loans. Brock, thanks a lot for joining us.

Brock: Glad to be here with you again today. We’re excited about working with MO talking about small business loans. There are so many business owners out there in the United States that are going through this process of I want to grow my business and I want to be guided on how I get a business loan.

We know that there’s a lot of pain out there because nine times out of ten a business owner goes and applies for a loan and is getting declined. Let me just give you a little bit of hope today because I would say that now more than ever the market timing to get a business loan is really, really strong.

We went through this recession at the end of 2008 where banks started to pull back and they were very, very hesitant to make any sort of loans because of the economy. Because of that, so many financial institutions now have a lot of deposits in their bank, and banks don’t make money by sitting on deposits. They make money by lending.

Now as we’re out talking to banks and credit unions, the ones that we have on board, it’s very consistent that over the next 12 to 24 months they want to aggressively push more and new small business loans. In addition to that, I would say the government is giving so many incentives to these financial institutions around doing a business loan. They’re encouraging them. They have this new small business lending fund that was a $30 billion fund, where they will be able to offer up to millions of dollars to these banks and credit unions if they’ll commit to do a small business loan. Market wide I would say the pendulum is coming back the other way for business owners to go out and get a business loan.

I guess with that, what I would do is recommend that if you’re a business owner and the pendulum is swinging back towards helping you, you ought to make sure you’re taking advantage of that. I’m going to give you just a few key tips and suggestions on what you can do to prepare yourself to get a business loan.

The first thing is, is you really need to understand your personal credit situation. Back in the day, you had to have a 750 credit score or whatever it might be. It’s not that stringent anymore. It still is stringent. You still have to have good credit, and so it’s important for you to understand what is my personal credit score, what’s affecting my credit score, is it low and why, and how can I improve my credit score?

If you understand what is negatively affecting your credit score, there are ways for you to be proactive now to be able to say, okay, I’m going to pay this loan down or there are some inaccuracies on my credit report that I’m going to fix, whatever it might be to get your credit score improved now so when it comes time to be able to get a loan, you’re in a good spot.

The second thing that you need to prepare for, and I’ve talked about this before, but you need to be prepared. Banks and credit unions a lot of times are lending based on their ability or the confidence that they have in you. For you to be able to instill confidence to a lender, you need to be able to make sure that they understand that you understand your business. Usually, that’s communicated through a really strong business plan that outlines the market, outlines your strategy, outlines your growth plans. That’s important.

The next thing that’s important is a financial model. It’s critical that you have a financial model in place. The last thing I would recommend, and this isn’t an underwriting issue. It’s not very often you’re going to get declined for this, but if you have a good looking website and you’ve invested in your business to show this is who I am and we’re very legitimate and it gives the loan underwriter confidence. Anything like that is only going to help your ability to be able to get approved for a small business loan.

Those are a few tips. The other thing that I would talk about is business owners a lot of times are really good at being, let’s say, they’re good at being a restaurant owner or they’re good at being a landscape artist or they’re good being whatever it is that they do on a daily basis. A lot of times they don’t understand that there are many more options for a business loan than just going to your bank or credit union.

I’ll give you an example. If you’re a startup, a lot of times you can get between 10, 25, all the way up to maybe 50, 60 thousand dollars worth of lines of credit through various resources that aren’t your traditional bank or credit union. A lot of  these resources still depend on your credit, but a traditional bank or credit union usually will require that you have two years in business before you get approved for a decent sized loan.

I guess what I would encourage you to do is, if you’re not an expert on getting a business loan, it’s important for you to talk to an expert, because usually those experts will be able to open your eyes to new loans products and new loan opportunities that you may not even think of because you’re really just focused on being a restaurant owner or other things like that.

Those are a few tips and suggestions on how you might be able to approach getting a business loan. We can certainly dive deeper in any other loan products. If you have questions that you might have, feel free to leave them in the comments or other things like that, and we can get back to them at another time.