Our application for an SBA-backed loan never made it to the SBA. The underwriters kicked it out, in part, because there wasn't a "reasonable assurance" that we could pay it back out of earnings. We made our projections as reasonable as possible. Without a crystal ball all we have is a history of product demand and the knowledge that we can sell all we can make. Since we were not able to present our case in person to the financial institution, I'm sorry we wasted the time and energy even applying through this particular channel.

On a more positive note, the SBA has a new "lowdoc" program which gives banks more freedom to use credit history, character, and bypass projected cash flow. "No predetermined percentage of equity is required and lack of collateral is not a determining factor." That quote is right from the SBA "Bank Notes" newsletter of August 2, 1994. (Thanks to Randy Hubbard of Race-Tech Engineering for faxing me a copy.) The program was also written up in Crain's Detroit Business.

The application for loans up to $50,000 is one page with no attachments! Up to $100,000, a company needs to attach the usual 3 years worth of tax returns and financials, etc. I hope the banks get on board with this program as soon as possible. I'm re-doing my business plan and projections and hustling down to the nearest participating bank.

Speaking of business plans, it seems that one needs to update one's plan on a monthly basis during the quest for financing. As the time slips by, the results of the financing you seek moves out causing the yearly results to be outdated. Thank goodness for word processors and spread sheets. Making changes is a pain but easily done once you're up to speed with your favorite software.

As your business plan evolves, it should be getting larger due to the addition of more detail. Always include any of your assumptions. It is easy to make assumptions without even knowing you've done it. Review the thought processes that went into your projections and carefully list those events and circumstances needed to reach them. Also list those things that could prevent you from getting there. Have a fall-back plan. Argue each point with yourself and your partners. It's good practice when arguing with the bank.