Low Rates Mean Good Timing for Small Business Loans, but Preparation is Key, Loan Expert says

Small businesses taking advantage of today's lower interest rates on commercial loans should make sure they are well prepared and knowledgeable before applying for a loan, said Jerry Bazata, vice president and head of Peoples Heritage Bank's small business lending program statewide.

"Being fully prepared is key," Bazata said. "I recommend seeking the advice of three important people - your lawyer, your banker and your accountant, in that order. Don't try to do it yourself, or you could miss a valuable opportunity to help your business."

Bazata is regional small business manager for Peoples, where he oversees more than 56 dedicated small business lenders statewide in the bank's small business-lending program. A resident of Ogunquit, Bazata, who can be reached at jbazata@banknorth.com, has more than 21 years in banking and joined Peoples in 1994.

Bazata, who has provided small business financing and advice to more than 500 small business owners throughout New England and New York in the past decade, outlined 10 important steps to take before applying for a small business loan:

1. Seek legal advice to make sure your business is set up as it should be, whether it's as an S-Corp, an LLC or a sole proprietorship.

2. Meet with your banker to begin developing your business plan. Most banks, including Peoples, provide this kind of free advice and assistance, and many have a form to fill out to help you through this process.

3. Sit down with your accountant to review your application. Knowing your business, he or she may have some very good insights as to whether or not the amount and the payment schedule is realistic.

4. In developing a marketing plan, remember your audience. Who are your customers and why do they want to buy your product or service?

5. Remember that a financial plan asks some of those same basic questions: How will you generate dollars, and how does your product or service reflect changes in the marketplace, consumer habits, demand and other factors.

6. Your final business plan will consist of two parts - a marketing plan and a financial plan. Place the two side-by-side and compare. These plans combined should be able to satisfy two important objectives: Does my marketing plan achieve the financial results I predicted? Conversely, does my financial plan provide me with the cash to complete my marketing initiative?

7. Remember that your banker can be an invaluable free resource here. Use him or her to get advice, walk you through the process, and help you fill out forms and complete the application, almost as a guidance counselor at a high school helps seniors with their college applications.

8. Keep in touch with your bank after you get your loan. Use your banker as an advisor so when and if you need another loan they are fully informed about your business's growth and well being.

9. Seek other resources beyond those mentioned, such as SBA, FAME, SCORE and Coastal Enterprises, for help in developing your plan. The Internet is a resource used by many new business owners to find business plan models, industry research on the your particular market, your location and your competition.

10. Keep in mind that the interest on small business loans is tax deductible and you should consult your tax adviser for specific conditions. The IRS is also a great resource for tax advice. Over the past year it has begun a program to reach out to small business owners and become more business-friendly. Recently it produced a CD-ROM that provides a direct link through the Internet to the IRS website. You can obtain a free copy of the CD-ROM from any of the small business lenders at Peoples Heritage Bank branches. Or call toll free at 1-888-747-9793 to have a dedicated small business lender send one to you.

Bazata said the time is now to think about financing, whether you are seeking venture capital for a new business, a line of credit for an existing business, a term loan for your small business to acquire new assets, or a line of credit to purchase inventory or finance accounts receivables.

"The cost of getting financing is at a new low. In late February, the prime rate was 4.75 percent, which means loans at Peoples, for example, are at about 6.75 percent for a variable rate loan, as compared to two years ago when that rate was 12 percent," Bazata said.

"That, combined with the economy beginning to pick up steam, makes for a good time for research and development, planning and developing new projects," he added. "It's actually a good time to plan an expansion. As consumer confidence continues to strengthen, businesses now have the opportunity to build inventories, introduce new product lines and expand marketing initiatives."

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