Speaking to a lender for the first time can be a harrowing experience. The future of your business may be riding on the interaction and you may have concerns about qualifying for the loan if your business is new or if you don’t have all the necessary paperwork the lender is asking for.
However, for small businesses seeking microloans (loans that are $50,000 or less) meeting with a lender for the first time doesn’t have to be a frightening experience. Many alternative lenders, such as CDFIs (Community Development Financial Institutions) offer microloans and provide business counseling to their borrowers and are willing to work with new or struggling businesses that may not meet all the eligibility requirements lined out on paper. Here are some key things to bear in mind when seeking alternative lending options.
1) Don’t assume you won’t qualify before speaking directly with the lender. Alternative lenders such as CDFIs are there because they want to help you. They may state that to be eligible, for example, you need to be able to produce financial statements from the past three years of your business’s operation, but what if your company just started last year? Jennie Motto, a loan officer from Accion Chicago, an American microfinance organization, shares, “Before you disqualify yourself, make sure to check with a loan officer. We may be able to work with you, even if you don’t meet all the qualifications on the website.” Don’t be afraid to call and discuss all your options.
2) Your business and your needs are unique. The borrowing process is going to be different for every business. The lender you are going to speak with represents a company that has a unique mission, just as your company does. Joan Broughton, senior vice president of Craft3, a non-profit CDFI based in Seattle, explains that the process of application includes “a series of questions to determine how ready they are to apply and whether who they are and what they are doing fits our mission.” You want to work with a lender whose mission is compatible with yours, who understands what you are trying to accomplish and has faith in your business plan. Being disqualified isn’t the worst thing that could happen—there are so many types of lenders out there, and one of them may be just right for you.
3) If you and the lender aren’t a good fit, you may be able to use the meeting to connect with other lenders. Loan officers are often connected to other lenders in the industry. If you aren’t a good fit for a particular lender, ask them if they know of any other lenders who might be able to help you. A referral from a respectable lender can help you secure the loan you need – so don’t despair if you are disqualified and don’t underestimate the power of networking.
There are so many ways for your business to secure a loan, so when speaking to a lender, keep an open mind for the opportunities that may arise. You may be surprised by what you can qualify for.