Small business owners finding loan approvals easier to obtain.

With the Southern California economy as robust and vigorous as it has been in 15 years, small business owners are in a buyers' market, especially when it comes to getting funds to expand their businesses.

But before business owners run laughing to the bank, experts caution: Know the four notorious stumbling blocks most likely to come out of a loan officer's mouth, and know how to handle them.

1) I don't know enough about your business.

To counter this, owners should put together a well-thought-out business plan. Included in the plan should be a detailed narrative of business performance for the last two or three years and where the owners want it to go in the next five.

2) Why do you need the money?

Never ask a loan officer, "How much will you lend me?" Rather, go into the meeting with an analysis of your company's cash needs and exactly how you plan to use that cash.

3) You don't have enough collateral. Most banks won't lend dollar for dollar against a given amount of collateral. They lend 80 to 90 percent of the value of real estate, 70 to 80 percent of a company's machinery and accounts receivables and 40 to 60 percent of inventory. Increasingly, under a credit moving system used by bigger banks such as Wells Fargo Bank and Bank of America, personal assets are taken into account as well. So have an itemized list of these on hand.

4) Your profits/sales aren't enough to justify the loan.

The key to loan approval is often cash flow. If a business has a short-term downturn in sales, accentuate the positive. There may be a host of logical reasons for a slowdown. A potential borrowers' presentation should ideally point to longer-term figures and why they believe short-term problems are just that - short term.

Having done this homework, you may find in the current "easy money" environment that much of this paperwork will not even be called for by loan officers. Both Wells Fargo and Bank of America now have in place highly streamlined loan processes that can generate a loan approval within 24 hours.

Here, for example, is what is needed to apply for a loan or line of credit of up to $50,000 under Bank of America's new Advantage Business Credit program.

A one-page application, available at any Bank of America branch across California, must be filled out. The following information is required: the type of business, annual sales, a list of personal and business bank accounts, a list of other business-related debts, a list of the company's owners and their personal financial information, including details on home ownership.

The completed application must then be submitted to any bank branch. It then will be forwarded to one of Bank of America's two California processing centers in Pasadena or Fremont.

For loans or lines of credit requests of more than $50,000 but less than $100,000, the following additional information is needed:

* two years of personal and business tax returns;

* a current personal financial statement on a form supplied by the bank;

* copies of recent financial statements showing ownership and balances for all liquid assets and retirement accounts not with Bank of America;

* As applicable, articles of incorporation and bylaws, partnership agreements, articles of organization and operating agreements and fictitious name statements.

For the largest of small businesses, which routinely seek loans in the $500,000-to-$1 million range, the loan process is more complex. In such cases, loan officers at financial institutions big and small report that they like to kick the tires and fully understand the business of the potential borrower.

Here the analysis of a company's balance sheet goes to its deepest level. For this, a business owner will typically need to provide more detailed information:

* three years of company financial statements and tax returns prepared by a certified public accountant;

* personal financial statements from all the owners;

* an interim business plan outlining short-term and long-term plans for the company.

With this information in hand, bank analysts take a very close look at the accounts payable and receivables, to ferret out payment patterns and potential bad debt the company is owed. The analysis is then compared to "industry norms" to see if the company seeking the loan is behaving typically or atypically.

Once the loan is approved, the next step is determining the interest rate the borrower will pay. Most loans are to be fully repayed within five years. Lines of credit are reassessed on a yearly basis, often without the borrower having to submit additional information.

Current typical Joan and line of credit rates are as follows:

For a line of credit, typical rates range from 1.475 percent to 10 percent above the prime rate, depending on the size of the loan and the creditworthiness of the borrower, as determined by the bank.

For a commercial loan, typical rates range from 1.475 to 8.75 percent above the prime rate, again depending on loan size and the credit risk.

At Wells Fargo, getting a line of credit can be as simple as getting a new credit card in the mall. Beginning last summer, business owners nationwide started receiving in the mail "pre-approved" credit line applications for up to $50,000. On a one-page form, applicants are asked to provide essentially the same information as on the form Bank of America uses.

For those looking for a more personal touch right away, smaller community-based banks may be the way to go. Two local examples are 1st Business Bank in downtown Los Angeles, which has nearly one-quarter of its total portfolio tied up in small business loans, and Redondo Beach-based Bay Cities National Bank. Officials at both banks cautioned applicants to come prepared. The first step at these banks isn't an application, it's a face-to-face meeting with a loan officer.