TNJ - May 2002 - Feature Story - Profiles of Black Women In the Business of Art By Shea Thomas By Shea Thomas

May 2002

Profiles of Black Women In the Business of Art

One gallery owner and two black women artists are making strides in bringing ethnic art creations to both black and mainstream communities.

By Shea Thomas

When was the last time you attempted to borrow money for your small business? How did the loan officer treat you? Did he seem uninterested in your loan application? Or did he please you by saying, “It looks great, we will get back to you,” but he never did. What the banker wanted to say, but did not, was that you are unprofessional and unprepared and that he cannot trust you with either the bank’s money or with his own reputation.
In spite of these lofty goals, there are compelling concerns about a lack of adequate storage area because vendors have to take their wares home with them after work.
“The storage might be a problem but we are looking forward to having a container so that the vendors can store their items in their booths at night,” said Hastick.

To increase their chances of securing financing, small business owners must first impress the loan officer, but in this case he found loan prospects unbankable or you do not meet all the criteria that the bank uses to approve its business loans. There might be problems with the borrowers’ credit, and there is a saying that banks do not lend money to businesses but to people. Even if you are not a perfect candidate for a loan, it is possible that you can win over the loan officer by projecting an image of a competent business owner. To accomplish this feat, you should be ready to answer the following six questions:

How much do you want?

Nine times out of ten, unprofessional loan applicants will ask the following question: How much can you lend me? You should know the exact dollar amount you want, and some professionals will advise you to borrow more than what you need. In this case, if the bank gives you less, you will get what you really needed. On the other hand, some professionals will advise you that you should borrow less than what you need and try for more later. Both of these strategies, however, can work to your detriment. A good loan officer will figure out for himself the amount of money your business needs. If you ask for too much, he will think that you’re trying to get the extra money to pay for other hidden expenses such as credit-card bills. Conversely, if you ask for too little you will come across as not understanding your business’s cash needs. In order to win the respect of the loan officer, the best approach is to ask for an exact figure, plus an additional amount for contingencies or miscellaneous items.
What are you using the money for?
Generally, there are three ways by which you can use the proceeds of a business loan: purchase additional assets, pay off existing debt or pay for revenue-generating expenses such as marketing. It is easier to secure a business loan to purchase assets; it is more difficult to get a loan to repay an existing loan, especially in cases where the borrower is having problems paying the loan. When applying for a loan, you must submit a detailed breakdown of how you will be using the money.

What good will this loan do for you?

Too often, business owners borrow money when their businesses are in trouble, but bankers hate to “throw good money after bad money,” and your loan request will most likely be denied in this case. In the eyes of a banker, you are borrowing to cover up an inability to manage your business effectively. If most of your receivables are more than 90 days old, then your business does not need a loan. You need a better collection system.

How will you repay the loan?

This is perhaps the most important question because it is paramount that the business owner clearly identify the source from which the loan will be repaid. In most cases, the primary source of repayment comes from the proceeds of the business. In this case, you must provide the banker with financial projections that show profitability and positive cash flow for the duration of the loan.

What are the terms of the loan?

The most important terms of a business loan are the repayment periods and the interest rates. If the business’s cash need is temporary, then the business owner should request short-term financing as a line of credit, in most cases payable in full at the end of the year. Nonetheless, most small business loans are medium-term financing with the repayment period of 5 or 7 years. If the purpose of the loan is to purchase fixed assets, for example, equipment or real estate, the repayment period is usually 10 to 20 years. The interest rate is usually stated as prime plus a certain rate. For short- and medium-term loans, you should request a rate of prime plus 2 percent.

What happens if you cannot repay?

Typically, business owners are overly optimistic. But banks have been burnt by enough bad loans and know better. To make a good impression on the loan officer, you need to show a balanced picture of your business. Take time to highlight the things that could go wrong with the business venture, and the contingencies that you have in place to deal with these possible problems.

Ultimately, your ability to secure a loan will depend on your meeting the bank’s lending criteria. In reality, most small businesses do not meet the criteria, making banks rely heavily on the borrower’s character. By answering the questions above, you are well on your way to bolstering your image in the eyes of a banker.

Clinton W. Daley is owner of BizJump, a small business consulting company located in Queens, NY. For more information please send an e-mail to him at BizJump@aol.com or call him at (718) 262-2578.

Send a Network Journal Greeting Card With Music to a loved one or friend. In preparing to celebrate Black History Month (February) here in America, the theme of our greeting cards for the next two months will feature famous people of color from the last century.

The music to accompany the cards are Motown and Reggae songs.