Small Business Loan Process Can Be A Bear, Even For Successful Startups

When iStrategyLabs CEO Peter Corbett decided to hire more employees for his D.C.-based tech consulting firm, he thought he was well placed for a loan. iStrategyLabs had been growing steadily since its founding four years ago, and it had won dozens of awards for its work.

But he still faced the biggest challenge all small business owners can face: convincing the bank to lend him money. 

"Not only prepare the documents but to literally make the case over and over again to the banks that we were credit worthy," Corbett says. "We showed millions of dollars in revenue and profits and it seemed to not even be enough to convince them." 

It's been almost four years since the recession ended, but credit is still tight and small businesses complain that banks are still hesitating on lending. At an event today, the National Small Business Association (NSBA) is trying to help business owners navigate their options. The teleconference, "Small Biz Access to Capital," industry leaders and small business financing experts will outline strategies and take questions from business owners. 

It took four months, but iStrategyLabs' loan was finally approved. 

"My concern is ... If it was so hard for us, who are very strong financially, to get a loan, how hard is it for others that are not so strong financially but are just good," says Corbett.

Nearly half of small businesses nationwide have not been able to secure financing in the last four years, according to a recent survey by the NSBA. 

For many businesses, it's more about assessing the risk of lending than the company itself, says Darrell Brown, executive director of the D.C. Small Business Development Center Network.

"A bank can say you are bankable but the risk that you're asking us to take on, may not be a risk that the bank is interested in doing," he says.

Although it's easier to get a loan now compared to during the recession, Brown says banks' lending standards are still far stricter than they were before the crisis, which allows fewer companies to qualify for loans.

Nilanjana Gupta contributed to this report.