If you have a low credit rating, getting a small business loan can seem like an impossible achievement. Bank after bank talks to you, looks at your business plan, and turns you down. Even the national banks, the ones with branches everywhere you look – the ones you think could easily help you without even noticing the burden – are shaking their heads as they talk about economic downfalls and tough times. Without delving into the irony, what can you do now?

Sometimes the biggest isn’t always the best. Take a look around your community, looking past the big bank signs, and walk into a local bank. The people who work there, who own the bank live near you. They have an invested interest in your community and are more apt to put money into it, even if low credit scores are involved.

However, local contacts alone won’t get you that loan. Of course, community ties will ensure you get a "case by case" chance, but you still have to put your best foot forward. You have to have the best business plan and presentation you are capable of producing. The most important aspect, the one they will look at hardest is your cash flow. This shows them that your business can generate the money to pay them back, to stay alive. Have good cash flow and despite all other negatives, you have a chance in the right venue.

The problem with asking someone for help is first you need to know what questions to ask. It’s one thing to have a general idea of how to go about something. It’s quite another to have a detailed written guide.

Here’s the good news. To make it easier to know how to get a SBA loan, the SBA has produced a second edition of their SBA Loan Book. "The SBA Loan Book, 2nd Edition provides you with step-by-step instructions on how to maneuver through the complex maze of eligibility, qualification, and approval needed to get SBA financing."

If you have the need, the desire, but not the understanding to get an SBA loan, this book will set you on the right path. Walk confidently in the knowledge that you know how to cross all the t’s and dot all the i’s.

There are many challenges for the Small Business owner, not the least is finding money. Aside from financial troubles, a small business owner can find themselves afoul of any number of government agencies. When Big Brother is bullying you, who can you call? The SBA has a sympathetic ear and champion for you: the SBA Ombudsman.

The SBA Ombudsman is a citizen’s advocate for dealing with the United States government. The office was created back in 1996 when the Small Business Regulatory Enforcement Act was passed. This act was to relieve bureaucratic pressures and government red tape for the small business owner. Currently, the SBA Ombudsman is a man named Nicholas Owen.

To help a small business – even if the problem is not in the Ombudsman’s purvue – Owen will contact the government office in question to set up a meeting. These meetings get to the root of the problem and help the problem get resolved quickly.

If you play with the big boys, you have to have a big stick. To get government agencies to call him back, Owen sends a report card to Congress on an agencies timeliness and how helpful they are. For example, the Citizenship and Immigration Services Agency, (a division of Homeland Security) rated an F for their sluggishness.

If you are hitting a brick wall with a government agency and don’t know where to turn. Call your SBA Ombudsman to see what they can do for you. You can reach the SBA’s ombudsman’s office by phone at (202) 205-2417 or (888) 734- 3247 (REG FAIR), and via e-mail at nicholas.owens@sba.gov or ombudsman@sba.gov.

Word of Mouth is great for advertising for your business, but can be misleading or even harmful when it comes to getting an SBA loan.  Here are some myths and their explanations from Mortgage101 and USgovinfo.

Myth: A person can get cheaper interest rates for business loans from SBA.

Fact: SBA does not give rates for loans.  These are negotiable with the lender, but are limited to at most 2.75% above the prime rate in the Wall Street Journal.

Myth: SBA has no programs to assist veterans.

Fact: SBA gives veterans priority when their loan application arrives in the office or when they need business counseling to start a small business.

Myth: It takes forever to get an SBA Loan.

Fact: Loans approved require SBA’s approval and funding within two days.  Completed loan applications from banks are processed within an average of ten working days.

Myth: There’s a mountain of government paperwork with each loan.

Fact: For most SBA loans, the SBA relies on the lenders paperwork only.
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Myth: You need to be turned down three times before talking to the SBA.

Fact: The SBA prefers that you have not had any lenders decline your application.

Myth: SBA loans are a last resort.

Fact: The SBA holds that they are definitely the best first stop for small businesses.  SBA loans offer more benefits, better terms, and fewer fees than traditional bank loans.

As you probably already know, the SBA doesn’t have money to loan to you. No, the money comes from private lenders such as a bank. Instead of money, the SBA merely guarantees your loan, freeing the bank to give you better terms, or to make the loan in the first place. While this may give you a loan that you wouldn’t get otherwise, therein lays a few potential pitfalls.

If you can’t get a loan from a bank by yourself, but can get one guaranteed by the SBA, the terms of the loan may be much more restrictive. For example, the SBA rules may dictate that the bank obtain a “blanket lien” as collateral. What this means is that not only the equipment you are purchasing with the loan is put up as collateral, but also your accounts receivables, vehicles, inventory, and other assets; even if they have nothing to do with the original equipment the loan was for. This can lead to a situation called over-collateralization.

If everything goes well, this is a great way for you to get that loan that you couldn’t before. However, if everything goes south, then everything is taken away. Of course that is a worst case scenario. Other, less final problems can arise with a blanket lien. For example, if your accounts receivables are part of the blanket lien, then when it comes time for the payroll that you would normally pay with money from receivables, you run into some trouble. You can ask the bank for permission to use the incoming funds, but in some cases the only way around it is to get the money from somewhere else to pay the payroll, or payoff the bank to get some breathing room.

This shouldn’t worry you needlessly; you can protect yourself. The best time to do this is at the beginning. Everything is negotiable, so ask a lot of questions. Find out exactly what the collateral requirements are and make sure not to give up any more collateral than necessary.

In continuation to the post on Friday.

If you have outstanding medical bills that might be forcing you towards bankruptcy, contact the collection companies and the medical facilities. Providers (who are more sympathetic than collectors) will often reduce the bill if you are willing to make a lump sum payment to them. The payment is usually significantly lower than the actual bill. If that is not a viable option; ask to make small payments; without interest. Remember they too, want your money. Anything is better than nothing for them.

If a small business owner is having financial trouble personally, it will be very difficult to receive a Small Business Administration government-guaranteed loan. Not impossible, just very difficult. You can improve your chances of obtaining a loan by working to fix the problems that are plaguing your personal credit before you apply for an SBA loan. If you know that bankruptcy is in your future, obtain your SBA loan first and then file for bankruptcy. It is not wise to mislead anyone in the process, but don’t offer up information that a possible bankruptcy might be in your future. Declaring bankruptcy after you receive your loan does not make you automatically in default on the business loan. Make certain you continue to always make your loan payments on time. As long as the payments are good and you have not breached any part of your contract, you will not have trouble with the SBA or your lender.

There is approximately $300 million in capital projects that is available from the Maryland Department of the Environment (MDE). In the past, most of these projects have been awarded to non-women, non-minority based, and non-small business types of companies. Times are changing in Maryland, and definitely for the good. Governor Martin O’Malley signed legislation this week, to extend encouragement of the inclusion of small, minority owned, and women-owned companies in their contact awards.

The new bill requires that good faith efforts become standard practice with the Maryland Department of the Environment. They intend to divide project components into smaller tasks, with reasonable schedules, so that minority; small and women-owned business can complete the projects. Businesses should also see more advisements in the media that will be intended to encourage these types of companies that would normally not bid on certain contracts. They will also develop a solicitation list that includes qualified companies, who will be notified of what projects are due to be available.

According to reports, this new legislation “will make full use of state and other resources such as the Maryland Department of Transportation, U.S. Small Business Administration; the Minority Business Development Agency; and the U.S. Department of Commerce lists, to identify qualified minority and small business enterprises.”

If all states would implement these policies as standard practices, small businesses would continue to thrive around the country.

The Arizona Public has a great article detailing the funding areas to look at to starting your own business.  The article includes tips on finding loans, lending and grants.

Worth a read!

Small Business Administration chief Steven Preston participated in a live Q&A on Monday to answer question about the small buniness community. The wastingtonpost.com has the full transcript of the call online. You can view it here.

Here is one of the question answered:

Washington, D.C.: How can I get in the queue to get a federal contract?

Steven Preston: We have courses online at sba.gov. There is a lot to know about this process, and you really should rely on our resources to help you.

The DOD has a network called Procurement Technical Assistance Centers that are great to help you.

There are numerous outreach events and conferences–see my earlier comments on two next week.

You can always call our local district office for support here.

In continuation to the post from Monday.

The advanced search allows you to search by keyword plus the days since posted, agency, category, eligibility and more. You also have the ability to set yourself up to have emails automatically sent to you when grants are listed in a particular category that you are interested in.

Once you have your CFDA number or Funding Opportunity number of the grant that you want to apply for, you will need to download a grant application form. You will need to create a grants.gov account first. This account will help you track your application status electronically. Be sure to answer all the questions asked and follow all of the instructions provided. Careful attention should be made to any deadline dates on the grant. Applications will not be considered once the deadline has ended.

Even though the process of obtaining a federal grant can seem difficult to muddle through, it can certainly be a windfall for your small business. There is so much grant money available, in many different areas, for businesses and individuals alike. Because most people do not know how to obtain this “free money”, there are millions of dollars that are not allocated each year. This left over money is then rolled into the next calendar year. You might also want to visit sba.gov for more information on federal government grant programs. Remember, the federal government has money to give away. They just need people to ask for it!