Start with a Small Business Loan

Starting a small business? Having troubling finding financing? If you answered yes to the preceding questions don’t get frustrated. You are not alone. Fortunately, there is hope for finding financing....

Starting a small business? Having troubling finding financing? If you answered yes to the preceding questions don’t get frustrated. You are not alone. Fortunately, there is hope for finding financing. You just have to look in the right place.

In 1953 the Small Business Administration was officially established to serve small businesses. This government backed institution was formed to offer financial support to companies that cannot receive financing through the traditional channels. By lending to small businesses the government is able to encourage innovation and competition in the capital market, thereby providing a valuable service to both the benefactors of the loans as well as to end consumers. Thanks to the business loans served through the SBA loan process, more then 20 million small businesses have been afforded the opportunity to compete with their respective market leaders since the SBA’s inception.

Today, the Small Business administration is as strong as ever. In addition to directly securing financing for small businesses, the SBA provides loan guarantees, contracts, and counseling services to ensure your business venture is successful. Many people are under the impression that the SBA only provides direct financing to small businesses but in fact, this is not at all true. The Small Business Administration also can serve as a guarantor on your small business loan, whereby you secure funding for your small business directly through a commercial lender and the SBA backs this commercial loan . In other words, should your small business fail and become unable to meet the payment schedule on the commercial loan, the SBA steps in and pays off the loan. In this fashion the SBA acts as insurance for your business venture. By guaranteeing business loans, SBA - with its limited loanable funds - is able to assist more small business obtain financing through other channels, such as commercial lenders.

The SBA has also moved to open up more services and products to everybody. They have developed programs to assist those involved in seeking minority small business ownership and obtaining microloans. The SBA has also been involved in producing Spanish language informational materials.

A small business loan can be used for a variety of purposes. Some past uses of small business loans include the following:

1. Buying real estate property to house the business

2. Construction, renovation or leasehold improvements

3. Buying furniture, fixtures, machinery, or other necessary equipment

4. For housing inventory and financing working capital

There are a variety of different loan types that can be obtained for your small business needs. For those interested in relatively small amounts of funds, one could apply for a microloan. A microloan can be issued for $5000 - $35,000 depending on the need of your business. These loans can be used for any legitimate business purpose. For many small startups not expecting to grow very fast, a microloan is a great choice.

Another option, offering higher loan amounts, involves dealing with your commercial lender and obtaining an SBA commercial loan directly through them that is backed by the Small Business Administration. SBA commercial loans offer the ability to obtain more financing for your small business, and the commercial lender is comforted by the fact that their risk on the loan is minimized thanks to the backing of the loan by the government.

These are just a few of your small business loan options. Now that you are empowered with knowledge on how to secure financing for your small business, continue your investigation into small business loans. You will find the small business loan service or product that meets all your needs.

Startup Funding

Startup Funding - Funding to turn your vision into reality.

Startup Funding is provided to foster a concept, develop the initial product or service and carry out the associated marketing.

In most cases, it is provided by angel or private investors - a primary source for emerging businesses needing to get started.

If you fit this description, what terms are you willing to accept for the investment? ##Are you willing to share control with others?

##Are you willing to share confidential information with prospective investors?

##Do your financial statements and records accurately reflect the operation?

##Are you willing to give up a large ownership stake in the company?

##Does your business have the ability to deliver an investment return of at least 30% to investors?

##Is there a clear path to potentially exit the investment within three years?

##Is the total market size at least $1 billion?

##Does the business have the ability to be one of the top three competitors in its industry?

##Have the technology and business strategies been validated through past experience or independent experts?

##Are you willing to accept the recruitment of additional executives to the business?

Qualifying for a small business bank loan

Whether your company is a hi-tech Internet start-up or an established manufacturer, extra financing is sometimes necessary to propel your business to the next stage of growth. Enter the small business loan. Offered at lower interest rates than a line of credit, commercial loans can provide an attractive resource for many expanding businesses.

A loan won't fall in your lap, though-obtaining a commercial loan does require a good deal of legwork and preparation. That's because your ability to secure a loan greatly depends on how well you present your company to your prospective lender.

Be prepared to have several key documents on hand before you even set foot in a bank. These should include personal financial statements, tax returns, monthly cash flow projections, and a well-prepared business plan. Established businesses should also produce references from suppliers and customers.

In addition, it's essential to be able to supply a well-organized plan of how you intend to use the loan. For a start-up company, this might involve listing the expenditures and inventory that you need to purchase. For a manufacturing firm looking to purchase a building, this might entail explaining what the building will be used for and how it will be used to increase revenue.

As a general rule, banks will never provide 100% financing. Start-up companies typically must contribute at least 25 to 35% of the costs. Contribution requirements can vary, however, depending on the stability of the business and the value of the collateral used to secure the loan.

While providing more collateral is one way to increase your chances of securing a loan, additional alternatives can help to reassure a reluctant bank. The U.S. Small Business Administration works in conjunction with banks to guarantee a variety of loans for small businesses. SBA loans are especially advantageous to businesses that have tight cash flow, as the terms of such loans can often be extended far longer than those of a comparable bank loan.

You can also improve your chances by finding out who will make the final decision regarding your loan. While this decision may fall into the hands of the bank officer you deal with directly, more often than not it will be made by a boss or a loan committee that relies on the bank officer's ability to tell your story. If the bank officer that you're dealing with has little lending experience, it might work to your advantage to schedule a second meeting and ask to have a higher-level officer involved.

Since guidelines on the types of loans processed differ from bank to bank, your best bet is to first turn to the bank with which you already have an existing relationship. In addition, local businesses, attorneys, and accountants are other good resources for a lender referral.

How much will the loan cost? Established businesses with excellent credit can expect to pay back the principal plus Prime. Start-ups should factor in the principal plus an additional 2 to 3 % above Prime. Moreover, SBA loans charge an upfront fee of 2% to 2.75% of the of the portion of the principal that they have guaranteed.

Quick tips

•If your credit history is less than stellar, a bank officer is more likely to be understanding about an accident that kept you out of work than an ongoing habit of overspending on credit cards.

•Pay attention to early repayment penalties. Some banks charge a 2% to 5%-plus penalty if you decide to repay the loan early.

•Limit your inquiries. Since each request for credit shows up on your credit report, apply to no more than one bank at a time.