Loan-Packaging Help
For a decade, entrepreneur Jared Heyman steered clear of commercial lenders in favor of self-financing his Atlanta-based online market research firm, Infosurv Inc.; however, his company's rapid growth intensified his need for outside funds. Ready for expansion, Heyman recently set out to obtain financing at a time when many companies are feeling the pain of a tightening credit market. With lenders treading more cautiously in the uncertain economy, Heyman decided to enlist a local Small Business Development Center to help him assemble his loan package--which experts agree can make or break a financing deal.
Heyman's loan package effectively told the story of his company through financial statements, detailed projections and a thorough explanation of how the loan would be used. "The banks care less about the pitch and more about the numbers," says Heyman, 30. "It's a risk-averse [lending] climate right now, and banks want to see very strong numbers."
The extra planning paid off: Heyman's firm, whose client roster includes Fortune 500 companies and government agencies, successfully made its case for financing and was awarded a $240,000 line of credit. The company projects 2008 revenue will hit $3 million.
Even with the credit stakes so high, many business owners don't take the time to prepare a complete loan package to present to lenders, choosing instead to make their cases verbally--often with disappointing results. Getting help from a loan-packager, whether it's a paid consultant or a nonprofit SBDC, can be the difference between maintaining the status quo and having fresh funds for growth. "[Having a professionally prepared loan package] is critical in today's market," says Darrel Hulsey, a business consultant for the Georgia SBDC Network.
Beyond helping you with loan documents, a loan-packager can also share valuable insight into specific banks' underwriting practices and get your financing request to creditors inclined to lend to a business like yours. "There are banks lending, [but] it's about getting to the right bank. And that's part of what a loan-packager does," says Donna Upson, managing member of Loan Packaging LLC.
Loan-packagers can also help you sidestep one of the most common pitfalls for businesses seeking credit: not knowing how much you need to borrow. Says Upson, "A lot of business owners do themselves a disservice by pulling a number out and saying, 'I think I need $400,000.'"
Fortunately for small businesses, loan-packaging assistance is often within reach. SBDCs typically offer their services for free but require that the borrower take an active role. For those who would rather take a back seat in the planning, Hulsey recommends hiring a paid packager.
Most of Upson's clients find her through referrals from accountants, attorneys, real estate brokers and former clients--all good places to start your search for a reputable packager. Says Upson, "It's actually somewhat rare that someone just cold-calls me."
Crystal Detamore-Rodman is a Charlottesville, Virginia, writer who covers the small-business finance market.
