Though banks continue guarding their money, accessing capital remains a challenge — though viable — endeavor for prepared operators

Anytime Joe Fugere needed a business loan, he simply went to the local branch of his major bank.

Now the owner of four Tutta Bella Neapolitan Pizzeria locations in Seattle, Fugere notched his first loan in 2003 to fund his original store’s opening. In the subsequent four years, he applied for and received two more loans to expand Tutta Bella’s presence.

“It was almost programmatic,” Fugere says.

In 2009, a growth-focused Fugere looked to launch his fourth Tutta Bella location. Business as usual, he thought.

Only it wasn’t.

The bank Fugere had worked with for six years declined his loan.

“I thought it was a fluke,” Fugere says.

He met rejection at a second bank; then, a third and a fourth.

“I went into each meeting fully confident,” says Fugere, Pizza Today’s 2010 Independent Pizzeria of the Year honoree. “I had a performing concept, money in the bank, and a history of making payments.”

Finally, Fugere turned to a community bank. He made his pitch a fifth time.

“Almost overnight,” Fugere says, the bank approved a Small Business Administration (SBA) loan, the government-backed program favored by so many small business owners.

“I couldn’t understand the hold ups, but I saw just how reluctant the banks were to put their money into a restaurant regardless of the balance sheet, the business plan, or the owner,” says Fugere, who has since refinanced all of his loans into the SBA program.

Whether looking to improve an existing location or open another unit, operators often need an infusion of capital to transition idea into reality. Though an increasingly prickly subject in recession-era America, money is available for the diligent, persistent and prepared.

As the economy collapsed in 2008, banks — so many overextended into loans — tightened their grip on capital. Even loan candidates with seemingly sterling credentials — 700-plus credit scores, industry experience, and liquidity — found negative responses and dreadful terms.

“It became a lot easier to say no to all the loans rather than yes to some,” says Ken Paton, a Portland, Oregon-based financial advisor to small businesses.

Slowly throughout 2011, with more cash on hand and profits to be had, banks loosened their grip on capital. Even so, the lending world remains a rigid, stubborn space as 2012 opens.

“Banks may be more open to making loans, but they’re still scared of making bad loans,” Paton says, noting that restaurants are often categorically termed “high risk.”

As today’s capital-needing operators routinely turn to banks, the most common loan partners given the expense and historical ease in granting loans, they encounter a world in flux.

In early 2011, Myron Allen sought $400,000 to open a Toppers Pizza franchise in Rochester, Minnesota. Like Fugere, he first approached a banker he had known for years. He was promptly dismissed.

“I was flabbergasted (the banker) wasn’t as excited as I was,” Allen says.

After great efforts with his local Small Business Development Center, an important ally for any owner navigating the lending waters, and a stop at BoeFly, an Internet loan exchange that connects operators with lenders, Allen landed a SBA loan at a regional bank. He hopes to open his Toppers location this summer.

Both Fugere and Allen share common stories in today’s climate, one littered with frustrations and, more importantly, critical lessons for others seeking bank loans.

Rather than simply having a hunch, operators must remove emotion and study the metrics through the banker’s eyes. In addition to understanding what makes their pizzeria work financially, operators must also know how the operation compares to national and local averages, numbers that can be obtained from the National Restaurant Association or state organizations.

“Go in ready to say, ‘Here’s my financial business performance, my concept and niche, and here’s how I compare to the average restaurant in America,” Fugere says.

Many operators will find themselves directed to an SBA loan and its two household options: the CDC/504 program, which concerns fixed assets, and the general-purpose 7(a) program. Both feature the government’s backing and kind rates.

Kevin Ellis, vice president of small business lending at Atlantic Coast Bank in Jacksonville, Florida, advises operators to adhere to the Boy Scout’s legendary motto: “Be Prepared.”

“First impressions matter,” says Ellis, who expresses a kinship with restaurateurs given that his own grandfather ran a Florida eatery for 50 years. “I walk hand-in-hand with that borrower, so I want us putting our best foot forward.”

Show a positive track record with quantifiable numbers, including three years of tax returns, a personal financial statement, and year-to-date financials. Then, attach projections and a comprehensive business plan, detailing everything from the concept’s marketing approach to its pricing strategy as well as the ever-important debt coverage ratio, which is when (and how) the loan will be repaid.

Then, sell the business and yourself with conviction and confidence, energy and enthusiasm.

“Getting a loan isn’t for the weak of heart,” Allen says. “You need to convince these bankers that you want to make money, which helps them make money. The money won’t simply fall into your hands.”

Chicago-based writer Daniel P. Smith has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.