Here are a few of the things that you need to know about before you start looking for one.
Capital is the foundation of any business, large or small. However,
money is especially critical for a small business that’s ready to get off the
ground. If you own and operate such a business, here’s what you need to know
before you get a loan.
What lenders look at: Lenders have different standards, but you
probably won’t get approved if your business deals in pyramid sales, gambling
and the like. Lenders look at your character, personal and business credit
history, and experience. They look at the same metrics for the other business
Financing: You need to show ability to pay back the loan. Exhibit
your faith in the business by investing equity of your own. Collateral isn’t
necessary but it does help. Required documents generally include business
financial statements, projected statements, a detailed business plan, cash flow
projections and personal guaranties from all major owners of the business.
Financing amounts: Loan amounts for a small business vary, but the
average Small Business Administration loan, according to the SBA, is $371,000.
The administration makes microloans of $5,000, and its largest guaranteed loan
is $5 million.
Who to look for: Start with the SBA and its website. You’ll find information on getting
a loan as well as the lowdown on other small-business services and
opportunities. Look for lenders you currently work with or have worked with in
the past; credit unions and community lenders are more likely to approve small-business
loans than large banks are. Get the required application information up front
and fill your application out completely. Forgetting even one small portion can
result in denial. Many small-business owners also turn to friends and family
members. Credit cards can also be helpful, but as always, weigh whether you can
work with the interest rates and payment terms.
Finally, it’s good to remember that in addition to a small business
do have other options when it comes to financing.