June 13, 2018
Unbiased Financial Information Provided by Financial Finesse
Most businesses need outside funding at one time or another. Even if you don't have wealthy relatives or rich (and generous) friends, you can still get the money you need to keep your business rolling along. Since gaining new credibility as the cornerstone of American commerce, small businesses have been receiving more support from the government and the financial industry.
Many Options If You Turn to Traditional Lenders
Possible sources of small business loans include credit unions, banks, commercial finance companies, venture capital firms, local economic development companies and equipment leasing vendors. With so many options, it helps to narrow the field.
A great way to focus your search is by getting referrals from other businesses. Where do your competitors borrow from? Going with a lender that understands your business can make the application process go more quickly and smoothly.
You can also try the most obvious option: visit a local credit union or bank. You'll have better luck and a more supportive relationship if you work with a local entity that is already familiar with your business and its place within your community. If you have your personal or business checking and savings accounts with them, all the better.
Or, as thousands of businesses do each year, you can turn to your local Small Business Administration (SBA).
SBA Supports Small Businesses
You're in good company when you take the SBA route -- such renowned companies as Federal Express, Intel, Nike, Apple, AOL and Ben & Jerry's started out with the SBA loan guaranty program, which imposes far less stringent borrowing requirements than the ones you'll have to meet for your typical lending institution.
One of the following SBA loan programs may be right for your business:
- 7(a) Loans: Loans up to $5,000,000 available to eligible businesses. Eligibility is based on the size and type of business, the use of proceeds, and the availability of funds from other sources. It's the most basic and most used SBA loan.
- Micro Loans: Small loans ranging up to $50,000.
- Real Estate and Equipment Loans: provides financing for major fixed assets such as equipment or real estate purchases up to $5.5 million depending on the loan's usage.
- Disaster Loans: Low-interest loans available to businesses of all sizes, private non-profit organizations, and even homeowners and renters.
- Small Business Investment Companies (SBIC): SBICs are private investment companies licensed by the SBA to provide loans to small businesses.
If you're interested in getting help from the SBA, contact your local office. Entrepreneurs can also visit Business.usa.gov for help finding seed and venture capital financing.
The Loan Process
Unless you're borrowing from parents or friends, you'll have to show how much you need to borrow, how you'll use the loan, and how you plan to repay the loan. In most cases, this is done as part of a well-documented business plan.
Some of the accepted reasons for borrowing include:
- Renovation or expansion of the current business property
- Construction of commercial buildings
- Purchase of land or buildings
- Financing of equipment or machinery
- Refinancing of debt or seasonal lines of credit
- Boosting working capital
You should also be prepared to complete your end of the paperwork, including:
- Personal financial statements for the past three years
- Business and/or personal tax returns
- Monthly cash flow projections
- A detailed business plan
- Profiles of the experience of your company's top management
- Company financial statements, including balance sheet and income statement
You don't have to let your business dreams die on the vine just because your financial account can't accommodate your plans. There are a lot of lenders that would love to help you become the next small business success story. All you have to do is ask.