Want to get financing for your small business?

Follow these four steps from the Colorado Enterprise Fund

The state of small business is strong in Colorado, with small businesses accounting for 97 percent of all businesses.  This is due to the entrepreneurial spirit that defines our state combined with greater lending opportunities. Denver’s rise as a magnet for startups has also helped.

For nonprofit lenders like Colorado Enterprise Fund (CEF), this trend is good news since strong small business growth produces strong, economically-diverse communities where more jobs are created and retained, and prosperity is a reality for more Coloradoans.

To help prepare you to apply for a business loan, below are steps we recommend based on our 40 years of working with small business owners. Even though CEF is not a bank, we utilize basic lending guidelines (the Five C’s) when reviewing a small business loan application.  The difference is our flexibility in applying these guidelines to meet your specific financing needs.

First, ask yourself these questions when thinking about applying for a small business loan:

  • If I want to start a business with a loan, do I have industry experience, transferable skills, a personal equity investment (up to 10 percent), an alternative income source (spousal or other jobs), plus the required business plan and financial projections? Am I ready to adjust my personal life to invest the extra time and money required until my business gets off the ground?
  • If I’m an existing business owner seeking a loan, do I have the financial ability to repay, the commitment and motivation to improve my business, a good payment history with other creditors, landlords, and suppliers, plus collateral available to secure the loan valued at liquidation or trade-in prices? How will I use this loan to continue to grow my small business?

Second, review the Five C’s, the factors we typically consider when evaluating a loan request:

CREDIT – While good personal credit is important, we recognize our applicants may have had some credit issues in the past. We also look at your net worth – the value of your assets minus your liabilities, basically, how much you own versus how much you owe.

COLLATERAL – This shows us how much you believe in your business by putting up something of value to ensure payment. This is a secondary source of repayment from pledged assets (receivables, inventory, equipment, real estate, etc.) per your loan request and other factors.

CASH FLOW – As the primary source for loan repayment, we review your business financial statements, projections, bank statements and tax returns to determine cash flow and profitability. We also look at your personal cash flow and debt service capacity as the primary business owner, which may include outside income.

CHARACTER – This refers to your experience and track record in your chosen business and industry, coupled with other factors that reflect your stability such as how long you’ve lived at a particular address, relative job history and timeliness of paying your bills.

CONDITIONS – Some businesses and industries are more difficult to finance due to specific industry conditions or trends in the local economy. We also consider the local market and competition, and how you plan to address these realities in your business.

Third, have these items ready before you submit your small business loan application to CEF:

  • Business Plan – clearly describing your new company, analyzing the market, explaining products and services, stating your expertise, and how you intend to operate; for an existing company, provide a business description and project plan for funds needed
  • Financial Documents – including a personal financial statement and tax returns, a business balance sheet, profit and loss statement, and tax returns
  • Financial Projections – realistically demonstrating your ability to repay the funds borrowed (2 years of monthly projections with assumptions)
  • List of Assets or Collateral – clearly defining primary and secondary forms of repayment

Fourth, work with our resource partners for additional assistance before applying, to ensure you have the best experience with the lending process:

Finally, when you are ready to submit your application to CEF, we will take the time to review all aspects of your small business loan request in our decision-making process.

If you aren’t approved the first time, don’t give up! Ask us why your loan request was denied and how you could improve it the next time. What aspects of the business plan didn’t make sense? Were there concerns about my ability to run a business? Where could I get help to improve my application? Are there other lenders who would be a better fit for what I’m requesting?

Once you get answers to these questions and revise your documents, resubmit your application. We’re happy to review it again and help you get the financing you need to succeed. Contact us at 303.860.0242 or info@coloradoenterprisefund.org for more information.

(This sponsored content was provided by the Colorado Enterprise Fund.)

About Colorado Enterprise Fund (CEF): Founded in1976, CEF provides loans up to $500,000 to startups and existing small businesses unable to secure traditional bank financing. With a mission to accelerate community prosperity by financing and supporting entrepreneurs and small businesses, CEF has provided $54 million in loans to more than 1800 businesses to help create or retain over 15,500 jobs in Colorado. For more information, visit: www.coloradoenterprisefund.org.

As President and CEO of the Colorado Enterprise Fund,, Ceyl Prinster is responsible for the overall operations of our award-winning organization including strategic planning, resource development, program delivery, technical services and public relations. Prior to joining CEF nearly 30 years ago, Ceyl was a commercial lending and training officer at United Bank of Denver, which is now Wells Fargo Bank. She holds the professional designation of Chartered Financial Analyst (CFA) and was chosen to participate in the inaugural 2014 cohort of the Citi Leadership Program sponsored by Opportunity Finance Network.

Categories: Company Perspectives, Sponsored Content