The Process of Approving Small Business Loans: An Interview with Teri Tosti 
Vice President of Commercial Lending-Sonabank

SLIDE 1
Interviewer: Hello.  Today we are speaking with Teri Tosti.  She is with 
Sonabank, and their holding company is the Southern National Bancorp of 
Virginia Inc.  They are located in Warrenton, Virginia, and Teri’s office is 
in Fredericksburg, Virginia.   They are a full-service bank providing both 
personal and business banking services.  Teri is the vice president of 
commercial lending.  Today, I will be asking her about the process of 
approving small business loans. Teri, thank you for joining us.

Teri: Absolutely

SLIDE 2
Interviewer: Teri, What are some of the different types of loans available to 
an individual who wants to start a small business? 

Teri:  There are a variety of loans available to entrepreneurs looking to 
start their own business.  I will concentrate mainly on a Small Business 
Administration (SBA) guarantee loan because that is the majority of what I 
do.  When a small business entrepreneur wants to start a business the risk is 
greater than any other type of business.  Therefore, most lenders will be 
looking for a SBA guarantee, in that the Small Business Administration will 
give the lender a guarantee to help mitigate the risk.  In my experience and 
especially in this economic environment that we are in, lenders will be 
looking for the guarantee to help provide funds for entrepreneurs to start 
businesses.  There are a million businesses started every year, but the 
failure rate of small businesses is so great that the lender will be looking 
at the Small Business Administration to guarantee the loan.

Interviewer:  Does the individual need to know what type of financing is best 
before he or she approaches the bank for a loan?

Teri: No, absolutely not.  When the client comes to me with their business 
plan, we will sit down and discuss what we think is best for them.  There are 
a variety of loans.  They come to me and say, “I think I need this one.”  As 
we get into the process, they actually need a different type of loan, which 
will be better for them.  If a SBA guaranteed loan is not what they need and 
they just want to do a conventional loan and their credit and collateral and 
everything else works out, we would do a conventional loan for them.  If it 
is a real estate loan, there are a couple different types of loans as well.  
Again, I always review this with my client.  If they really do not know what 
they need, I’ll tell them a couple of different ways we can go and what loan 
guarantee program we can use—either the state or the federal government.  All 
types—there are so many different types out there. 

SLIDE 3
Interviewer:  Is there some general information that they should read before 
they meet with you?

Teri: The SBA.gov website is a good website to go to for them to basically 
see what should be in a business plan, how to write your business plan, and 
what lenders are looking for.  There is also Small Business Development 
Centers in different communities. I know there is one in Fredericksburg.  I 
know there is one in Richmond and several other communities.  Those people at 
the Small Business Development Centers will help them fit together a business 
plan and prepare them to sit in front of a lender.  

Interviewer:  And that would help them with some of the terminology?

Teri: Absolutely.  Because again, lenders are looking for a well written 
business plan. It doesn’t have to be a long dissertation. It should be brief 
and to the point. [It should state,] what your business is, how you are going 
to market it and what your competition is.  It needs to be very brief and to 
the point.  The client needs to understand their projections, and  how they 
are going to repay a loan,  when they go to sit in front of a lender.

Interviewer:  What is a general rule of thumb about how long the plan should 
be - for example a  couple of pages?

Teri: I am going to say that it depends on the industry that the person is 
going into. I have gotten some that are three pages. I’ve gotten some that 
are 30.  It depends on the industry.  If someone is looking to buy a 
franchise sometimes that might be a little longer.  But sometimes the 
franchise puts together a packet for the individual.  Again, that varies on 
the industry.  If it is a hair salon, it doesn’t have to be so long.  But if 
you are manufacturing widgets, it is going to have to be a little longer, so 
I can understand it. 

SLIDE 4 
Interviewer:  Would the loan officer or bank be able to provide any guidance 
as to what loan fits the person’s financial needs?

Teri: Yes, if I am understanding the question correctly.  It all goes back to 
the different loans that a lender can offer. The SBA has different loan 
programs that are better for people.  If a small business owner is looking to 
expand their business, buy a piece of real estate, put a building on it, and 
move their business to it; the SBA has a specific program called the 504 
program, in which the majority of the time, the borrower only comes in with 
10%.  The 504 program helps their finances. For a conventional loan, you must 
come up with 20%, sometimes it is 25%  for the whole project.  That is a 
great program, and it helps their financing.

Interviewer:  That’s the 504 Program?

Teri: The SBA 504 Program, correct.

Interviewer:  Is there information on their website about that?

Teri:   Absolutely. The sba.gov website has information on every guarantee 
loan program they offer.

Interviewer: Do you have any advice on how a person selects which bank to 
approach for a loan?

Teri:  That’s a very good question.  I normally tell people to go directly to 
the bank where they have their checking account, savings account, and CDs.  
Try that bank first because that is who has had their account. They have a 
history with them.  If that doesn’t work, they can call me.  They can also go 
to the sba.gov website and look under the preferred lenders and that will 
help them chose a bank.  When a bank has a preferred lender status that just 
means that the process is a little easier for the lender to review, to 
approve, and to close because the SBA basically can underwrite their own 
loans.  They don’t have to send their whole package to the SBA for them to 
review it which can take weeks to go through that process.   Sonabank is a 
preferred lender, which means that I underwrite it. We get approval in the 
bank, and we start processing.  So, they can go to the sba.gov website and 
look for a preferred lender.

Interviewer:  That seems like that is not necessarily an easier way to go but 
a less complicated method by going to a preferred lender.

Teri:  Yes, that is correct.  It is just easier for the lender to get 
approval and to provide financing.

SLIDE 5
Interviewer:  If you are a person with a disability or member of a minority 
group, are there any special financial incentives or assistance that the 
individual should know about?

Teri: That’s a good question.  As a lender, and I’ve been doing this for a 
number of years, I treat each project the same.  Even if somebody with a 
disability comes to me and needs a small business loan, I am going to treat 
this just the same as anybody else walking through the door.  They’ve got to 
meet the requirements.  They’ve got to have the collateral.  Their credit has 
to be pretty good. I’m going to go through the process just like anybody 
else. Again, when I use the SBA guaranteed programs it is because—let’s just 
say someone wants to start up a company who is disabled.  The SBA has quotas 
that they have to meet.  So, if I’m willing to do the loan for them and I 
send it to the SBA for their approval and they think it is a little too 
risky, they can say no or yes.  But, they might say yes because they have 
quotas that they have to fulfill.  They want to make sure that people with 
disabilities get loans.  They want to make sure women get loans. You’ve got 
to find a lender willing to give you a loan first before the SBA will give 
you that guarantee.  Just because you get a government guarantee does not 
necessarily mean you will find a lender willing to do the loan.

Interviewer:  So what’s the first step then?  Should they go to the SBA for 
the guarantee or should they come to the bank first?

Teri:  I would say come to the bank first, because it is the banker that gets 
the SBA guarantee.  Find a lender first who is willing to work with you and 
to fund a startup project or an expansion project.  Find that lender first.  
If you have a business and you are looking for a small business loan, go to 
the bank where your business banking is done.  Go to that bank and ask for a 
loan officer.  They will have your records on what you deposited in the last 
year or two or however long you have been in business.  That is a good place 
to start. 

Interviewer:  Should you call ahead and have an appointment set up or should 
you just go to the bank?

Teri:  I would call ahead and ask for a small business loan officer.  Then 
call the loan officer and ask to meet with them. A lot of times they may say, 
come by, drop your project off, let me review it. Then we will meet and sit 
down and talk. Sometimes that is the best way to do it.  Then the lender 
knows what the project is about. You could also make an appointment.  It is 
very rare that a loan officer will read your whole business plan whileyou are 
in there.

Interviewer:  The first step is call and then drop off your paperwork, 
information, or your business plan and then call back to set up an 
appointment.

Teri:  That would be wonderful. Yes, I think that would be the best way.  
Absolutely.

SLIDE 6
Interviewer:  Once a person has chosen a lender, what information does the 
individual need to provide?

Teri:  Where do I begin?  Most lenders have a checklist.  I’ve got a 
checklist. I’ve got applications that need to be filled out.  I normally 
email prospective clients when they call me and say I want to start a 
business, or I want to expand the business.  I say let me email you a 
checklist of items.  The most important is your business plan.  What goes 
into that business plan is your resume.  Of course I will need some tax 
returns for the past three years and a personal financial statement from you.  
Those are the most important things.  Then again, I have a checklist of 20 
items.  If you get me those items, I can always start the process.

Interviewer:  When we mentioned that the person could drop off their business 
plan ahead of time, is it possible to get some information about this 
checklist that we could provide for people so that they could have some of 
that information available too?

Teri: Absolutely.  I’d be more than willing to do that.  Absolutely.

SLIDE 7
Interviewer:  So tell me, does a person always need collateral to secure a 
loan?

Teri: Not always, but the majority of the time, yes.  If someone comes to me 
and the only collateral they have is their home and there is absolutely no 
equity in it, but their credit is good, their business plan explains what 
they want to do, I believe in them, their character seems great, they’ve got 
experience in what they want to do, I would probably take the house even 
though there is no equity in it and finance the loan.  Again, I would use the 
SBA guarantee to do that.  It varies depending on the client, and whether or 
not there is collateral.  I had a client come to me who all he had was his 
business assets; he’d been in business for a while.  It was very little.  He 
didn’t have anything else, a home or anything, but I did a loan for him 
anyway, because I believed in what he was doing.  He was doing it for two 
years and was making a go of it. Again, it just varies.

Interviewer:  Teri, can you explain how a Small Business Development Center 
can assist an individual in securing a loan?

Teri:  The Small Business Development Center is a great resource for people 
looking to start a small business.  I always tell people to go there first if 
they don’t have their business plan written. The Small Business Development 
Center will help them write a business plan and basically prepare them to sit 
in front of a lender.  From my understanding, the Small Business Development 
Center doesn’t help in securing a loan.  They help the individual prepare for 
sitting in front of the lender.  It is the client who is going to have to 
sell the project.  The Small Business Development Center will help with the 
business plan with projections.  They will be in contact with the lender.  
They will suggest to them three or four lenders to go see that they know will 
help fund startups or a little riskier business or whatever.  They know the  
bankers in town - what they are doing and what they will lend money for.  The 
SBDC is a wonderful resource.

SLIDE 8
Interviewer: Teri, would a person with a limited work history have difficulty 
securing a loan?

Teri: Not necessarily.  It depends on each individual and what they’ve done.  
I can think of client that I had not too long ago, whose work history for the 
past three years was sort of up in the air.  She was traveling the world and 
doing some different things but not actually working.  I believed in her 
project.  I believed in her and her credit was fine. Again, it just depends 
on the situation.  I’m not going to say no to that. 

Interviewer:  If a person gets turned down, would the lender offer advice or 
assistance in reapplying for a loan?

Teri: Normally they do.  I have a lot of lenders in town that I know of in 
Fredericksburg, if they can’t do it they will refer them to me, especially 
when it is a startup business.  A lot of lenders won’t even touch a startup. 
Normally,a lender will refer you  to somebody else that might be able to 
help.  They will refer you to the SBDC.  Sometimes I will tell people if I 
know that they have credit issues, that their credit is real bad.  I will say 
to them, here is what I recommend you do, go clean it up, pay down some debt, 
and then come back and see me.  Come see me again in six months or a year.  
Definitely, I’ve had people who apply, to go fix whatever needs to be fixed 
and then reapply.

Interviewer:  So the person should ask for some advice or recommendations if 
they are not approved for the loan?

Teri:  That is correct.  They should definitely ask why they were turned down 
and then ask the lender if they can give them another name of someone who 
might be able to help them. Absolutely.

SLIDE 9
Interviewer:  Have you ever assisted a person with a disability in getting a 
loan to start a small business?  If so, was that any different than working 
with any other customer?

Teri:  My answer to that is absolutely yes.  I worked with someone, it was a 
couple, who were deaf.  This was a couple of years ago.  I didn’t find it any 
different working with them than anybody else.  They couldn’t hear, but they 
could read lips.  We communicated.  One of them could actually speak well 
enough that I could understand him, or we would email each other back and 
forth.  When it came to closing, they brought someone to help them with sign 
language during the loan signing.  I reviewed that loan like I would for any 
other person coming in. And, they are still in business. 

SLIDE 10
Interviewer:  Teri, if a person receives a loan from Sonabank, what are the 
next steps?

Teri:  The lender will probably, come visit the shop when it is open.  I will 
just use an example.  Let’s say you are starting a franchise. You are leasing 
space. You are building it out. You are opening a restaurant or something 
along that line.  The lender will come out when you open to see how you are 
doing.  Normally lenders, I can speak for myself, I just pop in sometimes.  I 
just stop in.   How you doing?  I will look the place over and walk out. It 
is very rare that I call in advance, because I want to see that the business 
is up and functioning on its own, and what it is doing.  Are there clients at 
the business?  Is the restaurant actually serving? Etc.  Your lender will 
always ask for financial statements in the future - once this loan is closed 
and the funds are borrowed, and the business is up and functioning.  At least 
once a year, the small business owner will have to provide tax returns, 
financial statements on the business, and probably an updated personal 
financial statement as well for each of the partners—if there is only one 
owner, then from the owner.  Again, the lender is going to want to make sure 
that that business is on track with the projections that were provided in the 
business plan.  If not, then how we can help it grow from that point.

Interviewer: It is really like a partnership.

Teri:  Absolutely, it is like a partnership.  I have to do a lender review 
every quarter on every SBA loan that I do, which basically tells me what that 
business is doing—if they are keeping up with their goals, if they are making 
the goals they thought they would.  If their cost of goods sold is basically 
in the right percentage of the industry across the board.  Sometimes we can 
figure out if there is a problem.  A restaurant owner called me and he had an 
issue of someone stealing from him.  He didn’t even know it until he sent me 
the financials. I reviewed them and went back and said, your cost of goods 
are a little high?  Have you looked into this?  We discussed some things and 
sure enough he had someone stealing from him.  So, it’s a great thing to keep 
your lender involved.  Absolutely.

Interviewer:  It is sort of like a check and balance system.

Teri:  It is, because the lender can look at the financials in a totally 
different way than the small business owner.  

Interviewer:  That is really good advice. 

Teri, I would like to thank you for speaking with us today.  I know the 
information you are sharing with us will be very beneficial to anyone that 
has started a business or is interested in starting a business and applying 
for a small business loan.

Teri:  Thank you for having me.