Banks and institutions that lend money have a lot of knowledge about the success rate of small businesses. Bankers are often overly cautious in making loans to small businesses. For that very reason, it makes sense to study their approach, even though it may seem discouraging at first glance.

1. Banker's Ideal. Bankers look for an ideal loan applicant, who typi-
cally meets these requirements:

* For an existing business, a cash flow sufficient to make the loan
payments.
* For a new business, an owner who has a track record of profitability
owning and operating the same sort of business.
* An owner with a sound, well thought-out business .
* An owner with financial reserves and personal collateral sufficient
to solve the unexpected problems and fluctuations that affect all
businesses.

Why does such a person need a loan, you ask? He or she probably doesn't, which, of course, is the point. People who lend money are most comfortable with people so close to their ideal loan candidate that they don't need to borrow. However, to stay in business themselves, banks and other lenders must lend the money deposited with them. To do this, they must lend to at least some people whose credit worthiness is less than perfect.

2. Measuring Up to the Banker's Ideal

Who are these ordinary mortals who slip through bankers' fine screens of approval? And more to the point, how can you qualify as one of them? Your job is to show how your situation is similar to the banker's ideal.

A good bet is the person who has worked for, or preferably managed, a successful business in the same field as the proposed new business. For example, if you have profitably run a clothing store for an absentee owner for a year or two, a lender may believe you are ready to do it on your own. All you need is a good location, a sound business plan and a little capital. Then, watch out Neiman-Marcus!

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