hands signing contract in meeting
Bank of America's Sharon Miller explains each facet that plays a part in obtaining a business loan. — Getty Images/undefined undefined

If you could create your own fantasy Board of Directors who would be on it? CO— connects you with thought leaders from across the business spectrum and asks them to help solve your biggest business challenges. In this edition, a CO— reader asks how to improve your chances of getting a small business loan.

Sharon Miller, Head of Small Business for Bank of America, answers…

Small business owners are often juggling numerous responsibilities on a daily basis — from managing daily operations to hiring, social media, planning and invoicing. In addition, many entrepreneurs find accessing capital and managing cash flow to be among their most significant challenges. In fact, the U.S. Small Business Administration reports that low cash flow is the single greatest contributor to the failure of small businesses.

According to our recent Bank of America Small Business Owner Report, 15% of entrepreneurs plan to apply for a loan over the next 12 months. Whether you’re first starting out or already well-established, this can become a stressful, time consuming process — but it doesn’t have to be. Here are a few tips to position yourself for success in the loan application process — whether through a traditional bank or alternative sources:

Build a relationship with your bank

Business owners that have the most success in securing access to capital do so by partnering with a small business banker early on — before they even are thinking about taking out a loan. The better we know our clients, and the better you know us, the better we can work together to help identify solutions that are most appropriate for your business. In some cases, it might not be the right time for your business to apply for a traditional bank loan. When you have a strong relationship with your banker, they can refer you to an abundance of resources and alternative options. Your small business banker should be your partner — someone who is just as committed as you are to the long-term success of your business.

Always come prepared

Take the time to create a strong business plan with a detailed budget, an explanation for why you need funding, how you will use the loan and a display of financial projections from profit-and-loss and cash-flow statements. Lenders are going to look to see that you yourself have invested in and are committed to your business.

Business owners that have the most success in securing access to capital do so by partnering with a small business banker early on – before they even are thinking about taking out a loan.

Sharon Miller, Head of Small Business, Bank of America

5 C's of credit

Keep in mind that generally creditors will evaluate you against the “5 C's” of credit when making lending decisions for your small business:

  • Capacity evaluates whether your business can support debt and expenses. Usually, you need enough cushion to absorb unexpected expenses or a downturn in the economy.
  • Collateral includes accounts receivable, inventory, cash, equipment and commercial real estate. Lenders may also take into consideration existing debt that your business may still owe on collateral.
  • Capital looks at whether your business assets outweigh liabilities; and how much capital you and other outside sources have invested.
  • Conditions such as the economy, industry trends and pending legislation may be taken into consideration, although these are often out of your control as an individual small business owner.
  • Character – your own character and the character of those tied closely to the success of your business is critically important. Factors such as personal integrity, industry experience and good standing can make a difference.
  • Plus one more: In addition to these 5 C's, there’s one more C that can make a world of difference: communication. Your willingness to communicate openly with your banker and your other advisors about the opportunities and challenges your business faces is key to a productive financial partnership.
 Sharon Miller, Bank of America
Sharon Miller, Head of Small Business at Bank of America — Bank of America

Consider all your options

Bank loans may not be the best fit for your business at this time; however, your small business banker should work with you to provide alternatives to consider if that is the case, including:

  • Community development financial institutions (CDFIs) provide capital, mentoring and financial advice supporting small businesses, affordable housing and nonprofit organizations operating in lower income communities. These partnerships help address important economic and social issues and help entrepreneurs achieve their goals and grow their businesses.
  • Your personal network can help support you when starting up. This is a personal choice and dependent on your relationships, but often those friends and family who come onboard as early “investors” bring with them the added benefit of bolstering an entrepreneur’s support system throughout the entire small business journey. It’s important to define the terms of the financial agreement in writing to ensure there is no confusion with friends and family. Without this safety net in place, misunderstandings can sometimes go even as far as ruining your closest relationships.
  • Crowdfunding can be a great way to capture the viral nature of the internet, especially if you have a feel-good story or an innovative product. Crowdfunding sites like Kickstarter or GoFundMe can provide an entrepreneur with the capital that needed to turn their idea into a reality, while also providing contributors with reward for funding a project.

Who's on your fantasy Board of Directors? Email us at co@uschamber.com and tell us what you'd like to ask them. We'll do our best to make it happen.


CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

Published February 25, 2019