Suggestions on finding small business loans.
Some of the most important decisions you will make as a small business owner concern financing and how to get a loan for your business to get started, to grow and to prosper. Like any other business decision, research and study are crucial to a profitable decision.
The first thing a lender will look at will be your financial plan. You need to decide how much money you will need and how that money is going to be spent. You will need to show the
lender that you will be able to repay the money borrowed and on what kind of repayment schedule. Are you looking for a short-term one-year loan, or a longer five-year loan?
A strong cash-flow analysis will be as important for obtaining the loan, as it will be for running your business. You will then be able to show your income will be sufficient to make your
payments in a timely manner.
You should also consider whom you are going to approach for the loan. Many banks advertise their services for small businesses, but you may find that the large banks have a very
specific size of "small" business in mind when they go looking for clients. Unless you are looking for a mortgage or other secured loan, your community bank might be a good option.
Wherever you go for your loan and no matter how much you are asking, you will want to consider the possibility of getting backing for your application from the Federal Government's
Small Business Administration. The SBA offers loan guarantees - no money - but their guarantee makes the process a lot more convenient.
When you go to a potential lender, your lender and you will see if it makes sense to apply to the SBA for a guarantee. You will then have to present your business plan, show your ability to repay, and show that your business is run efficiently and is well managed. There is no specific collateral requirement for an SBA guarantee but any collateral you have to offer will be taken into consideration. An important consideration is owners' equity in the business.
The SBA guarantee is actually a guarantee to the lender in the event the borrower cannot repay on the loan.
Another way to obtain financing for your business is if you are eligible for the Federal Government's Minority Small Business Loan Pre-qualification Program. If you are eligible for this program you will find public and private sector agencies willing to help you.
To be eligible your business must be 51 percent owned and managed by a racial or ethnic minority person and not engaged in speculation or rental real estate. If you are eligible the SBA will set you up with a technical-assistance organization to work with you on your application and take you through the loan guarantee process.
In addition to federally guaranteed loans, many states and even municipalities have programs that can help you obtain money for your small business. To obtain these loans you will most often need to show how this money will work to the benefit of the community giving you the loan.
If you're looking for business money beyond your credit card and personal savings, there are people to help and places to go. But do your homework and be able to show your business plan is viable and the lenders' money is safe.
