So where does the government fit into all this loan business? The Small Business Administration (SBA) offers several types of loan guarantees. In recent years, the SBA has backed away from making loans, and has instead guaranteed portions of bank loans. The most popular program is the LowDoc program. It gets its name from the idea that there are low (or little) amounts of government paperwork required. The program is administered by commercial banks, not the SBA. The SBA allows approved bankers to process loan guarantees for up to 80% of the loan. There is no interest rate or other benefit for you, since it is a commercial bank loan. In fact, it will cost you several hundred dollars extra. Because the SBA guarantees up to 80%, the bank may be willing to take a risk in lending to you where it otherwise would be unwilling. So if you are a marginal credit risk , the SBA guarantee may be worth the extra cost to you.

In general, smaller banks will be more willing to work with company owners than larger banks will. Large banks have increasingly gone to a formula approach for loan approvals rather than looking over each applicant's specific circumstances. However, no banker will stray far from the requirements imposed by the U.S. Comptroller of the Currency regulations and auditors. The big determinant in banking is developing a relationship with a particular banker. The response from the same institution can vary depending on the experience, risk tolerance and personal relationship you have with each banker.

Expect the banker to ask for your entire relationship when you receive a loan approval. This means opening a checking account with the lending bank, moving some investments or savings, and considering some of the bank's other services. Bankers call this "relationship banking." You can gain some special advantages from such an approach if you also look at it as a relationship, not just a one time loan. Invite your banker to visit you business, or stop by the bank to show your banker your latest financial statement, even if you don't currently have any loans outstanding. When you do need funds, this extra effort at building recognition can occasionally help close a loan deal for you. Also, by making them aware of your business, your local bank will work with you on special needs (such as waiving some bounced check fees, occasionally floating a deposit for an extra day, etc.)