How to Get Small Business Loans – Revised

As an entrepreneur you have invested a substantial portion of your personal funds into your business start up. However, even as the business grows, you realize the need for more funds. You now consider getting some form of small business loans. Such loans come under many names and have some variation in the terms of use and payment. However, getting a small business loan needs some careful preparation on your part.

If you are a merchant, you can ask for and obtain a merchant cash advance. The money so obtained can be used for a variety of purposes as long as you can show that you have sufficient collections each day to meet the repayment schedule. The only areas where the lender will need convincing are your ability to repay and your willingness to do so. If your credit rating is good and your business model is such that there is a regular flow of customers, you should have no trouble in getting this advance.

Those looking for small business financing should also approach the Small Business Administration for help. If the SBA is convinced of your business plan and agrees to underwrite your loan amount, the risk to the lender is reduced. The lender is, therefore, more willing to consider your loan application positively. You might also be able to negotiate a lower rate of interest because of the lower risk to the lender. This will increase the profitability of your operations as well.

To ensure that you get your small business credit, make sure that the banker is aware that you have invested not just your time, but also your money in the venture. Credit unions and other lenders typically expect you to have invested between 25 and 50 per cent of the necessary capital.

You should approach small business lending institutions when you need small business loans. Such institutions have the mechanism to evaluate your small business or start up and have funds earmarked for this purpose. They are also more willing to lend at a lower rate of interest.

Use all the collateral your business has built up to obtain a business credit line. By pledging the assets of the business, whether it is real estate or machinery, you are reducing the risk to the lender. This kind of financing is much easier to obtain then a loan based just on the cash flow of a company. Of course cash flow is still important, but collateral helps to ease the process of obtaining the loan.

When applying for small business loans step into the shoes of the lender and vet your proposal thoroughly. You will find that you need to convince the lender of your ability to repay the loan from the cash flows generated by your business. Lenders are also concerned about your willingness to repay the loan. Here, your credit rating and credit history come into play. If you have a good credit rating, make sure that you highlight this to the potential lender.

Loan Options For Your Small Business

Becoming a business owner is a very exciting and bold step. With a new business comes many options. From location to staffing, there are many components to weigh and consider. One of the most important of these is funding. While obtaining financing can seem like a frightening process, it is important you realize how many options you do have for funding your small business.

The following are some of the most common options for small business financing:

  • Micro loan: These small loans are for business start-ups. They are typically $35,000 and under in amount. These loans can be easier to obtain than traditional bank loans depending on your proximity to a local lender. Sometimes the applicant must go through training and business planning education before obtaining the loan.
  • Franchise financing: If you are opening a franchise you may be able to obtain a start-up loan from the overall franchise company. Also, if the franchise company does not help you financially themselves they can help you obtain a loan from a bank with a pre-established relationship with the company.
  • Development Financing: This form of funding provides your business with long-term, fixed rate financing for your major fixed assets, including land and buildings. This applies to small business ventures in developing communities.
  • Import and Export loans: These are loans available for small businesses that have been operating for at least a year which are facing difficulty in obtaining reasonable financing. In this program lenders are encouraged to offer a loan to the small business with the guarantee that they will be repaid 90% of the loan amount (Which cannot exceed one million dollars).

If you are interested in obtaining any of the above loan and financing options for your business it is important you consider getting support from an experienced legal professional.

If you would like to know more about business start-up and financing options, visit the website of the Des Moines business formation lawyers of LaMarca & Landry, P.C. today.

Financing for a Small Business

There are many different ways that you can obtain financing for a small business. Most entrepreneurs initially go to a bank in order to receive the capital that they need in order to launch or expand a business. However, given the current credit market environment, many small business owners have had significant trouble as it relates to obtaining the money that they need from lending institutions. As such, one of the most popular alternatives to using a bank loan to start a business is to work with private investors. However, it is should be noted that these investors will require a significant amount of equity as it relates to providing capital to your business.

If you are a company that is already in operation then it may be in your best interest to first work with a lending institution as having a proven track record can ameliorate a vast majority of the risks associated with paying interest and principal back on a monthly basis. This is especially true if you have a significant amount of built up equity in your business. It should be noted that most banks and financial institutions are going to want to see a tremendous amount of tangible assets as it relates to your business. There is always going to be a need for collateral when you are working with a traditional financial institution.

When you are working with a private investor the most important issue to note is that your business must be economically viable. If your business does not or will not produce a profit that will sustain a 20% year on year return on investment then you may find that you are going to have significant trouble finding investors that are willing to put capital into your business. This is primarily due to the fact that the risks associated with small business investing is extremely high. As such, you should focus on how you intend to manage risk if you take capital from an angel investor or other type of private funding source.

The final methodology of financing a small business is to use your existing lines of credit. This may include credit cards and home equity loans that come with a low to moderate interest rate. Many of the best small businesses were started this way, and although the personal financial risk is high, this type of financing may come with far fewer expenses. We are going to continue to discuss creative ways that you can finance your business on an ongoing basis as it relates to getting capital for your new or ongoing venture.