A fellow business owner mentioned she got a small business loan. You’re looking for financing, so you ask her what lender she went to and call to make an appointment. Getting a loan should be simple, right?

Maybe not. According to Spencer Vivian, a relationship banker with Vectra Bank in Grand Junction, you might have just broken one of the cardinal rules of getting a loan: Start where you have an established banking relationship. Ideally, you should have at least a two-year personal or business account history with the bank where you seek financing.

“General underwriting guidelines require being in business for two years for conventional lending, similar to getting a mortgage as a self-employed individual. However, it’s not necessarily required to have a relationship with the bank for two years to get a loan with that bank,” Vivian said. “While it does typically help to have the relationship, it is not required.”

What do you need to get started once you’ve met the relationship threshold? Some of the paperwork you should gather before meeting with your banker includes:

Lending and payment history, such as your home loan.

Two years of personal — and business, if applicable — tax returns.

Three months of business and personal bank statements and account balances.

Profit and loss statements.

Why would a small business want a loan in the first place? Maybe you don’t need or want a loan or line of credit (LOC) right now, but things can change in a flash.  As Vivian put it: “The best time to get a loan or LOC is before you need it.” Access to a loan or LOC becomes a business safety net. If you need money in a hurry, you might be out of luck if you don’t plan for that possibility.

Many business owners think about loan programs backed by the U.S. Small Business Administration. The SBA doesn’t make direct loans. By guaranteeing repayment of a portion of the loans, the federal agency enables lenders to extend financing to businesses that might not qualify under conventional terms.

Here are some of the criteria you’ll need to meet to obtain SBA-backed financing:

A history in the industry your business serves. This could be your work experience, business experience or a combination of the two. If you hire key people with relevant experience, that could count.

A detailed business plan.

Key employees with experience in your industry and a record of success.

A two-year projection of sales and net — not just gross — income.

An approach that satisfies the lender you’re realistic and have done your homework.

Allow for three months to gather and prepare information and another three months for the lender to process your loan application and supporting information for the SBA. Then allow several more months for the SBA to do its part.

Why are business loan and LOC applications turned down? The reasons aren’t much different than when you get turned down for a credit card, auto loan or mortgage:

Your personal and business credit isn’t satisfactory.

You don’t have at least 10 percent to put down on a loan.

You’re new to the business and have no track record.

You don’t assemble a complete application package with all the required supporting documentation.

You show little or no net income even though your gross income is adequate. You’re writing off too much.

What can you do before applying for a loan or LOC to increase your odds of acceptance? Check your personal credit score and see if there are actions you can take to improve it. Check your Dun & Bradstreet listing and pay attention to your FICO Small Business Scoring Service score. The range is 0 to 300, and lenders generally want at least a 165. SBA-based loans might allow a slightly lower score, but don’t count on it. Getting — and managing — a business credit card is a key element in improving your FICO SBSS score.

If you seek a larger loan — to acquire real estate, for example — how much money you have available to put down could drive the process. 

Matt Burgess, a business banker with Vectra Bank in Grand Junction,  said at least a 10 percent down payment is required for SBA-backed loans. That proportion increases to at least 20 percent for traditional financing.

No matter what type of financing you seek — traditional business loan, lines of credit, SBA-backed loans or real estate loans — keep your personal financial house in order. 

When you first seek financing and even when your business has been around for decades, lenders want personal guarantees.