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Things to Remember When Acquiring Small Business Loans

A business that is able to generate enough profit is worth venturing into. However, it is not usually easy to run a business and be able to generate the desired amount of profit within the desired period of time. There are many factors that can account for this. However, money is usually the underlying factor. For example, you may have dreams to propel your business to higher heights but you may not have enough funds to bring your dreams to fruition. In order to quail the negative effects of financial hurdles in running a business, it is always advisable to acquire a small business loan. Small business loans can be acquired from any financial lending institution. However, there are certain important factors that you have to bear in mind before acquiring a small business loan.

First of all, you must try to carry out a viable and timely market analysis. This step is very important and should not be overlooked. Market analysis can enable you to know how to run a business without incurring too many losses or any losses at all. It is a sure way of knowing the strengths and weaknesses of your business, learning more about the number of customers who may available to help you sustain your business and the estimated amount of money that you may have to pump into your business in order to see viable results. Without this step, any business is bound to fail.

After carrying out market analysis, you have to found out the hurdles that will affect your business. It is important to always bear in mind the fact running a business is not a smooth ride. Sometimes there are losses which can be substantial enough to ruin your business. A good business person must know how to avoid the hurdles that are associated with running a particular business. If you want to be a successful business person, you have to remember to identify all your obstacles and how to overcome them. As a matter of fact, only small business finances that have been acquired by business persons who are aware of the obstacles awaiting them have been properly utilised.

It is also important to identify all the risks that may be involved in the running of a particular small business. In this case, the business person involved will be responsible for deciding whether to take a particular risk or not. Some risks tend to yield desired results, while others tend to jeopardise the progress of a business. It is entirely up to you as a small business owner to decide whether to take a particular risk or not. The timing is usually important because it determines whether the risk is worth taking or not.

If you have prospects of acquiring one of the small business loans, you must be able to use the funds accordingly. In this case, this means expanding your current small business so as to generate enough funds to repay the loan. Otherwise, acquiring a small business loan will be equivalent to digging your own grave.

Financing the Small Business Start-Up – The Number One Way to Finance Your First Business

Of all the things you will have to take care of when starting your first small business (defined here as sales between $100k and $1 million in the first year) you’re going to need start-up capital. You’ll use this capital to help you with initial costs and cash flow until your business becomes profitable. Following are a few options you may have already considered:

  1. A few searches on the internet will tell you Venture Capital Firms, Angel Investors, or Private Equity Firms are a great place to start. While this might be a great option for some, these types of firms are looking for the next sensation that will generate millions of dollars in a short amount of time. Not only that, you will have to give up ownership of your business and most times you will set a sale date before you even open the doors.
  2. Another option you might consider is using your entire savings account, combined with a loan from your 401K, combined with 2-3 credit cards. While this option is attractive because you won’t need approval from anybody to do it, if you end up needing more money you can get into trouble quickly. I would only recommend 100% financing your start-up by yourself if you ‘ll have more than 6 months of expenses in addition to your start-up capital, or a significant other has a job which covers all of your personal costs.
  3. Ask your Mom, Dad, In-Laws, your rich Uncle Henry some cash. This can be a great option because they’ll be more than likely to give you favorable loan terms and will be more willing to work with you if things get tight, well….maybe. The downside to this option is that your “borrowing money from your family” which means you’ve just added a layer of potential family problems. This can lead to an awful lot of stress on you so I highly recommend thinking it through if you decide to pursue this option.
  4. Finally, borrow from thousands of people. That’s right, but you might know this method better as “getting a loan from a bank”. But, “Banks aren’t lending anymore” is what anyone you ask will tell you. This simply isn’t true, Banks are still willing to lend money to business start-ups with the assistance of the Small Business Administration’s (SBA) 7(a) loan program.

The SBA 7(a) loan program is a government sponsored program which allows first time business owners the ability to borrow money from a bank to start a business. Here is how it works: As long as a bank follows certain guidelines, it can provide you with financing and the SBA will guarantee a large portion of the loan. The guarantee means that if the loan goes bad, the SBA will write a check to the bank for the guaranteed portion of the loan. This greatly reduces risk in the loan for the bank creating the opportunity for you to borrow money to start your first business.

Here are a just a few of the benefits that make this the number one option for financing a brand new small business:

  • Bank financing is one of the cheapest forms of financing available.
  • You won’t see your banker at family dinners.
  • While banks decide whether or not they’re going to lend you money in the beginning, they won’t tell you how to run your business or force you to sell at a pre-determined date.

This is the short and sweet explanation of why SBA 7(a) loans are the best form of start-up financing for small businesses. If you would like find out more information on how to get approved for a 7(a) loan please visit Best of luck to you in starting your business.

Why Micro Loans Could Be The Answer to Many Small Business Owners Financing Needs

Small business owners, if you have never considered accessing a Micro Loan, you might want to take a look at this viable financing option. Some of you might think that these types of loans are used only in Third World countries. Perhaps you have heard of lending sites such as Kiva dot org, which primarily finances individuals living in countries other than the United States who are starting their own businesses.

Micro Loan financing is one of the best small business financing options available in today’s tight lending climate. This type of financing has been around for many years. Micro Lenders have finance entrepreneurs to the tune of billions of dollars worldwide. There are many other financing options available, but this type of financing has survived the recent financial storm and continues to grow exponentially.

To know if a this financing solution is a good fit for you, first, determine if a small loan amount is adequate for your business. Next, consider the criteria you must meet to be approved for the loan. There are many types of Micro Lenders and they all have different processes in place to either approve or decline your loan request

The answers to the questions below will help to determine if a Micro Loan is right for you:

  • Why should I use a Micro Loan? Large numbers of loan requests have continued to be approved since the financial crisis hit in 2008. Prior to the economic downturn, lenders would typically take two to three weeks to approve a loan request. Since 2010, traditional loan approvals have taken as long as 10 weeks or more. Many of these loans are now being approved in 6 to 8 weeks. This time-line is, of course, based on factors that must be taken into consideration on a per client basis.
  • Where do I access a Micro Loan? These loans are available through local, regional, national, and international sources. These sources have their own guidelines for approving loans. Some of these lenders are privately held “for-profit” companies, while others are nonprofit or not-for-profit organizations.
  • What do I need to access a Micro Loan? The lender will require such documents as your credit report, itemized Use of Funds list, cash flow statements, bank statements, and any other document the lender deems necessary for them to feel comfortable in approving your loan request.
  • How do I qualify for a Micro Loan? You will qualify for a loan based on the requirements of the Micro Loan lender you use. These lenders will request enough documentation, collateral, and other information to make them comfortable with the risk they are taking to loan you money.
  • Does my type of business fit this loan option? Each lender sets their industry specific requirements. You’ll need to determine if the source you’re working with will finance your type of business. If you don’t know your industry category, check the NAICS codes system or North American Industry Classification System at Census dot gov.

Many of you may have tried unsuccessfully to get loans from traditional financing sources such as banks. Perhaps your lender did not explain clearly why you failed to qualify for a business loan. Maybe you did not prepare well for traditional financing. For example, if your credit score was too low, or you didn’t have sufficient collateral to offset the risk associated with the loan amount you requested.

If this is the case, a Micro Loan could potentially improve your financial situation. This loan option is a great way to get your business moving quickly. You can access this type of financing based on a number of factors.

Factors to Consider for such a loan are:

  • Start-ups less than 2 years in business – $15,000 to $25,000 loans available
  • Seasoned businesses more than 2 years in business – $35,000 to $50,000 loans available
  • Loans use available collateral such as equipment, vehicles, jewelry, etc.
  • Loan approval time-line – 6 weeks to 10 weeks or more per lender
  • Some lenders lend nationwide, while others finance regionally or locally
  • Types of industries – All types included with restrictions in the construction and medical industries

If Micro-Loan financing fits your small business needs, then by all means use it to grow your business or help stabilize it. Remember, it’s a loan option you can use and reuse in shorter periods of time when compared to repaying a loan for a larger amount. Be sure to prepare effectively for this or any other financing option so you can qualify and get the working capital you need.

If you don’t know where to look for Micro Loan sources, check with your local area bank, Small Business Development Center, Women’s Business Center, Small Business Technical Center, local Chamber of Commerce, or a business consultant in your area.