The dollar chase: before you start the race, here's some expert advice on the steps you should take to make sure you get the business loan you need.

Business loans can be difficult to qualify for, particularly for start-ups and small businesses, but the process does not have to be intimidating.

With interest rates at historical lows, the time couldn't be much better to apply for a loan, according to experts. However, it is the responsibility of the borrower to prepare for the loan application to ensure a timely and accurate process.

Here's a step-by-step guide from some of the region's top financial experts.

(1.) Put it down on paper

Steve Peacock, vice president and area manager, small business banking for National City Bank, says lenders need to see that a loan plan has been considered by the business.

"You want to have a plan or some thoughts put down on paper that shows us how much money that actually needs to be borrowed," he advises. "If a business misses their projections (revenue) a little we won't usually call you on the mat if you put a lot of thought into it."

(2.) Prepare a cash flow analysis

Some businesses do not have an accurate idea of the amount needed for their business until a cash flow analysis has been completed by a reputable accountant or book-keeper, Peacock notes. This analysis will generally ensure that the business will not have to seek additional loaned funds in the immediate future.

"If a business comes to us and says they need (a certain) dollar amount, then realize that's not enough it causes a lot of problems," says Peacock. "We want to ensure that there isn't an emergency situation, like payroll, where they need money right away and don't have it."

(3.) Research your best options

Virtually unlimited business loan options are available, but Bob Potter, managing director for Follmer Rudzewicz Advisors Inc. in Southfield and Sterling Heights, says the best options are traditional lending institutions such as leading banks. These lenders can provide the lowest-cost financing with high-quality service. These are, however, the most difficult loans to get.

"For start-ups or some small business, it can be tough to find the working capital for certain types of loans. The cheapest financing rates require certain qualifications that can be tough for new businesses," says Potter.

Online options should be explored if traditional lending institutions will not offer the loan, although Potter says he's personally skeptical of Internet-based lenders.

"I think that it is easier to gauge a possible (applicant) with eye-to-eye contact because you get a sense of projections and business models," he says. "With online lenders it's just point and click."

(4.) Develop a 'shopping list'

No matter the size of the business, Potter recommends utilizing in-house professionals such as lawyers, financial planners and accountants in developing a loan shopping list. A business owner needs to rely on these individuals first because they will get an honest assessment of the best available options.

Regardless of the lending institution utilized, businesses should pay close attention to the interest rate, any revolving line of credit, working capital rates generated and whether the banker will require a personal guarantee from the business through the life of the loan.

(5.) Be prepared for regular reports to the lender

Most lending institutions require monthly or even weekly reports from a business that has received a loan. The lending institution is interested in assuring that the business has not fallen into a difficult financial position, says Troy Schrock, an independent financial consultant and partner with Solutions at Work LLC in Farmington Hills.

Even after the loan has been provided, Schrock notes, it is standard procedure for the lender to receive these statements. It is rare that a personal guarantee is given in lieu of such regular reports.

"You may be able to negotiate out of personal guarantees or a relaxed covenant but only if the business is showing very good results," he says.

As a financial consultant, Schrock serves as a virtual chief financial officer for his clients. His involvement in the business loan process can include developing cash flow projections, referring bankers, occasional negotiating and developing a game plan for the business owner.

"What we can do is help a business sell themselves to a lender, which is what it comes down to," he says.

(6.) Consider non-traditional loans

Some financial institutions offer non-traditional types of loans such as factoring. This refers to a unique type of loan that could include such methods as selling receivables up front, allowing the business to utilize the loaned money in a more timely manner.

National City's Peacock says reinvesting in a business shows a commitment to that business and to pay off a loan. He recommends SBA Express, a program endorsed by the U.S. Small Business Association (SBA), as one example of a small loan that is more efficient than what the government offered in the past.

(7.) Watch your debt load

"Putting equity back into a business is proof that success is desired and it keeps the attention of a business," Peacock says. But he warns that businesses can become too dependent on money derived from loans, noting that it's also important to maintain a "manageable" monthly payment.

"Businesses can sometimes borrow a lot of money to start, but one down month can cause them to get behind the eight-ball," he cautions.

Business loans rarely take much longer to process compared with common personal loans such as home mortgages, but business loans in general are much more difficult to secure, says Potter. He says lenders are more apt to finance a house because they are less likely to lose their investment, since the value of a home will almost always rise.

"While lenders for businesses want collateral, banks are more concerned about cash flow and loan payment," says Potter of Follmer Rudzewicz Advisors. "They don't want collateral called into question if at all possible.

"With a business, it is not as easy to capture assets because they can be filtered away or squandered," he says. "With a house, there isn't a problem because the lender can repossess the property."

RELATED ARTICLE: Business needs: a 5-point checklist.

Since the nation's economic slowdown officially began in 2001, lenders are taking more time to analyze loan applications.

"Lenders will be looking at applicants with a higher level of scrutiny based on what they have in their portfolio," explains Richard DiBartolomeo, partner in the Assurance and Advisory Services Group for the Great Lakes Region of Deloitte & Touche LLP.

"There is a fair amount of due diligence that banks will perform. They will want to know about financial statements and look at the officers and business plan."

DiBartolomeo suggests that business owners take these five steps when beginning the process of applying for a loan.

1. Contact professional advisers--this includes lawyers, accountants and financial consultants. They can recommend lenders they have regularly worked with.

2. Have your business plan in order--this includes developing cash flow projections, a business plan and organizing financials.

3. Shop for the best loan rates--utilize references and online sources as needed.

4. Consider government grants and programs.

5. Challenge everything.

DiBartolomeo, who also is in charge of the Deloitte & Touche Growth Company Services for the Great Lakes Region, says the borrower should make sure he or she understands the paperwork involved, which makes working with professionals even more important.

"You have to make sure you understand the lender's requirements and if there are any guarantees," he adds.

Worth noting

Venture capitalists invested $36.5 billion in start-up businesses nationwide in 2001, a 63-percent decline from $99.6 billion in 2000.

Source: National Venture Capital Association

Mike Scott is a freelance writer.