Okay, I admit it. If you can’t tell already from my more recent posts, I am a bit of a cynic when it comes to the ease and even the possibility of most small businesses qualifying for a traditional bank loan. However, I came across a more optimistic writer, and decided to share this CNN Money article with you.
The article does a case study for a woman named Gloria who runs a bakery from her home, and who wants a loan to buy the inventory of a bakery in town. She does not have three years of financial history to report. These are the most important points the article made about how to qualify for a loan without that essential financial history:
1) Construct a REALISTIC monthly revenue projection for the first 3-5 years. You have an edge if you have SOME sales history which you can present in support of your projections.
2) Business Plan: Use your revenue projections to create financial projections for the first three to five years. These are the projections you should include:
a) A profit and loss projection – Remember, “…your gross margins (revenue less cost of goods sold) must, at minimum, be enough to maintain positive profits and cash flows… Providing clear documentation of expected operational expenses is important, particularly for variable expenses. ”
b) A cash flow projection which shows cash-in/cash-out on a monthly basis
c) Projected year-end balance sheets
Tools:
1) The article directs small business owners in need of a loan to SCORE’s free business plan templates, and also their templates for financial projections.
2) They also suggest using iBank.com to “broadcast a loan application and other data to hundreds of banks” at a time.”
3) I recommend checking out some previous posts of mine on free online tools for small business owners.
Unfortunately all this optimism remains unsubstantiated. At the bottom of the article, they ask people to submit stories of how they qualified for a loan without a financial history – there don’t seem to be any responses.
If you are one of the many small business owners who are unable to qualify for a loan, or you simply don’t have the time to waste trying, you might need to consider alternative financing options.