Episode•November 21, 2024•21 min

How to Secure a Business Loan with Craig Calafati | Ep. 355

In this episode of Money Talk With Tiff, Tiffany Grant sits down with Craig Calafati, an experienced small business lender. Craig brings over 30 years of experience in lending to small businesses, sharing invaluable advice on what successful business owners do and don't do. This episode is packed with insights on the importance of networking with successful entrepreneurs, coming prepared to financial meetings, and understanding the intricacies of business lending. Check out the full show notes: https://moneytalkwitht.com/podcast-show-notes/successful-small-business-loans/ Key Takeaways Networking and Mentorship Surround yourself with successful entrepreneurs. Seek advice and learn from others who have been in similar situations. Preparation for Lending Know exactly how much money you need and why. Be able to clearly articulate your business needs and repayment plan. Business Plans and Financials Have a detailed business plan, whether you're starting a new business or running an existing one. Ensure your financial records are accurate and transparent. Real Estate Considerations Consider leasing rather than buying property initially. Save your cash and park it for unexpected expenses rather than tying it up in real estate. Lending No-Nos Avoid starting any projects or signing leases before loan approvals. Stay open to feedback and be prepared to adapt. Tax Returns and Profitability Aim for profitability on paper when possible; tax returns are crucial for lending decisions. Engage a good accountant to maintain the integrity of your financial records. Connect with Craig EVP, Director of Lending at Arkansas Capital (CDFI) Website: arcapital.com Connect with Tiffany Grant Website: moneytalkwitht.com Social Media: @MoneyTalkWithT If you enjoyed this episode, consider subscribing and leaving a review on your favorite podcast platform. Thank you for listening, joining, and being a part of the Money Talk With Tiff podcast! This podcast uses the following third-party services for analysis: Podcorn - https://podcorn.com/privacy OP3 - https://op3.dev/privacy

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Key Takeaways

1
Surround yourself with successful entrepreneurs for mentorship and real-world advice
Connect with people already in your target business to learn the ups and downs before you encounter them
Use these relationships to avoid common pitfalls and gain practical insights that books can't provide
2
Know exactly how much money you need and why before approaching any lender
Never ask 'how much can I get?' — this signals you don't understand your own business needs
Be prepared to clearly articulate the amount needed, timing, purpose, and repayment plan
3
Lease rather than buy real estate in the early stages of business
Cash is king for startups — unexpected expenses will arise and you need liquid reserves
Consider a 3-year lease with an option to buy once the business proves successful and you understand your space requirements
4
Never sign leases or start projects before receiving full loan approval
Starting construction or committing to leases can kill deals and create title insurance problems
Have a letter of interest and reviewed lease documents ready, but don't execute until approvals are secured
5
Maintain accurate, transparent financial records and work with a good accountant
Lenders scrutinize tax returns and will add back legitimate expenses like depreciation
Showing profitability on paper matters — aggressive write-offs can hurt your ability to secure financing

Intro

Tiffany Grant interviews Craig Calafati, EVP and Director of Lending at Arkansas Capital, who shares 30+ years of experience helping small businesses secure funding.
Craig Calafati is an experienced small business lender with over three decades of experience. He previously owned a small business and now specializes in lending to entrepreneurs through Arkansas Capital, a CDFI.

Arkansas Capital

– The Power of Entrepreneurial Networks

Craig emphasizes the importance of surrounding yourself with successful business owners who can provide guidance based on real experience.

Find people in that business and befriend them and talk to them and find out the ups and downs. Try to fill those potholes before you get to them.
– Craig Calafati

– The #1 Mistake: Not Knowing How Much You Need

Craig shares that many applicants show up without knowing their exact funding needs, which immediately raises red flags for lenders.

That's pretty much the last thing you want to say to a banker or any lender... We want to know that you know exactly what it is you need, how much you need, when you're going to need it and how you're going to pay it back.
– Craig Calafati

– What Lenders Look For: Business Plans & Financials

For startups, lenders want comprehensive business plans covering operations, pricing, costs, and maintenance. For existing businesses, they scrutinize financial records to ensure the owner truly understands their operation.

– Real Estate Strategy: Lease First, Buy Later

Craig warns against tying up cash in real estate during the startup phase when unexpected expenses are inevitable.

Cash is king. It couldn't be truer with a startup business. There are always going to be expenses you didn't count on.
– Craig Calafati

– The Leasing Process & Lender Review

Landlords will review your financials just like lenders. Get an unsigned lease for your lender to review before signing anything.

Please don't [sign a lease]. Don't commit to these things until you have all your approvals and your lender tells you, yes, go ahead.
– Craig Calafati

– Lending No-Nos: Preparation & Mindset

The biggest mistakes include showing up unprepared, not knowing your repayment plan, and starting projects before approvals.

The bottom line for every lender is, how are you going to pay me back?
– Craig Calafati

– Tax Returns, Profitability & Working With Accountants

There's tension between minimizing taxes and showing profitability for lenders. Lenders add back legitimate expenses like depreciation. A good accountant is essential for maintaining clean books that withstand lender scrutiny.

– Asking for Feedback After a Denial

Always ask why you were denied and what could improve the application. Good lenders provide feedback throughout the process, and nothing should be a surprise at the end.

Resources

Arkansas Capital
Full Show Notesarticle

Topics

Small Business LoansBusiness PlanningFinancial PreparationReal Estate StrategyLending RequirementsTax Returns & ProfitabilityEntrepreneurial NetworkingBusiness FinancialsLoan Application ProcessCDFI Lending