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Are You Loan Worthy?

Just because the economy has dried up some sources of funding doesn't mean there aren't alternatives.

This story appears in the July 2009 issue of Entrepreneur. Subscribe »

The may have dried up some sources of funding, but that doesn't mean you can't get the capital you need to start, operate or expand your . The key is to make yourself look as loanworthy as possible, says Steve Bloom, past chair of SCORE , a former angel investor and a longtime mortgage lender. "Small-business owners need to think the process through before they approach lenders. You get one shot. Lenders don't tell you why they're turning you down, and they're not there to help you figure out how to ask for money."

Bloom suggests devising an elevator pitch that briefly states who you are, what you do and what makes your business special. "What are the challenges and threats in your industry, and what solutions do you bring to be able to deal with those external forces?" he asks. "Small-business owners talk about opportunities and forget to talk about land mines."

To help you get started, the SBA suggests thinking through questions like these before you fill out your first loan application.

  1. How badly do you need the money, and how quickly must you have it? The less urgent your needs are, the less risky you appear to lenders. By anticipating your needs instead of reacting to them, you'll be able to negotiate the best terms.
  2. What do you need the money for? The more specific you are about your financing needs, the more likely you'll be able to find a lender for them.
  3. Does your need for capital reflect your ? If not, consider whether you've strayed from your purpose or if your business plan needs to be rewritten before you approach lenders.
  4. Do you have the right people in the right jobs? Lenders will look at your management team before making a lending decision.Bonus question: Do you actually need more capital, or can you restructure your current cash flow to operations more efficiently?

Help Them Help You
Sure, you're doing everything you can to keep down; you have your eyes on the bottom line. Your employees, however, may not have the same unbending motivation to save your company money. Here are five tips to encourage employee cost-cutting.

Lead by example.
Don't fly first class if you expect everyone else to fly coach.

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