Getting a small business loan isn’t magic, but it does require preparation and an understanding of how bankers operate, according to Mark Abell, the SBA Division director of at the community banking franchise, NBH Bank. Writing for Kiplinger.com, Abell shared these five ways to improve your chances of getting approval for your small business loan.

1. Apply for the right loan at the right bank

Some banks do not lend to certain industries, such as loans for hotels. When seeking a bank, make sure it actually lends to your industry.

2. Show your cash flow

Start by creating a narrative that helps underwriters understand anything that should be taken into account to get the loan. Think back: Were there one-time expenses or unusual circumstances in any of the last three years that hurt performance? If so, explain it.  Think ahead: Are there changes on the horizon that will boost revenues or mitigate expenses? Explain this, also.

Perhaps a conventional bank loan isn’t right for you? See SmallBusiness.com’s Guide to Alternative Funding.

3. Bolster your personal credit

For small business owners, personal credit scores have a major impact on corporate creditworthiness. Improving your score before seeking a loan is vital. Tip: Don’t pay late. “Making credit card payments four days in advance of due dates will result in dramatically lower utilization and can significantly improve credit scores,” says Abell.

4. Calculate your collateral

Companies turned down for insufficient collateral can offer to add collateral or they can seek a U.S. Small Business Administration-backed loan. SBA loans are more flexible on collateral when cash flow is sufficient.

5. Improve your equity 

Small businesses can appear to have too little equity value or too much leverage (a measure of the total liabilities compared to the total equity retained in the business), especially when owners withdraw most or all of the excess cash flow each year.

Here are ways to address this situation:

• Can the business owner contribute a down payment on the project being financed to bring these equity-to-debt ratios more in line?

• Can the owner take a lower salary or distributions in order to maintain more cash in the business?

• Can the owner show underwriters personal savings accounts funded by the business that effectively act as equity?

As a rule of thumb, banks don’t like more than $3 or $4 of debt to every dollar of equity, says Abell.

VIA | 5 Tips for Getting Your Small Business Loan Approved, Kiplinger.com

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