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Certainly us government small business loan information is
important to helping you succeed in your business. Here are some
resources to help you along the way:
Successfully Obtaining a Small Business Loan
By Rebecca Game
Working with a bank to obtain a small loan can be an easy or difficult process, depending on how prepared you are to meet with the lender and discuss your business' situation and needs.
One of the leading causes of failure is insufficient start-up capital. Ironically, though, lenders rarely approve loan requests for the businesses that have the highest need for a small loan. Instead, lenders tend to prefer to offer small loans to those businesses that have been in operation for two or more years.
According to All Business, it is estimated that 95 percent of all entrepreneurs opened their businesses with capital from their own pockets, or from money they borrowed from relatives, friends, or another person in their community. Lenders want to see owners risk their own funds in the venture, and often require that the owner or owners provide a minimum of 25 percent of the capital needed to start a business, and at least that much equity in the if the is already in existence. Simply stated, lenders aren't as willing to take a risk when a owner doesn't even risk their own money in the investment. Businesses with a history demonstrating success in paying their bills for two and a half to three years will have the easiest time obtaining a small loan because they've proven their ability to meet financial obligations.
Preparing a Small Business Loan Proposal
When preparing to apply for a small loan, be prepared to face the facts that are against you, and use them in your favor. Persistency is necessary if you want to land a small loan. Lenders follow certain criteria to determine if the small loan is a wise investment for the bank. Most importantly, the bank will determine if the small loan is likely to be repaid. As with other businesses, banks and other lenders must answer to their investors and stockholders, and unpaid loans show instability in the bank or financial institution.
Items compiled into a small loan request include the following:
- Amount of money requested
- Likeliness of profitability and demonstration of cash flow needed to service a small loan
- Collateral, if any is owned by the business
- A reasonable balance between debt and equity
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Know Your Banker
Whether you have a start-up small or an established small business, the first step in obtaining financing through a small loan is to develop a relationship with your banker. Consider asking your bank's manager to open a file for your business, and provide quarterly or yearly profit and loss statements. When your is in need of financing, the bank will already have a file and will be at least somewhat familiar with your operations. When the time comes to apply for a small loan, approach the banker with a solid plan to inspire the lender's confidence in your business. Provide information on operations, marketing efforts, management ability, and financial projections for three years, as well as a cash flow projection and personal balance sheet demonstrating the worthiness of the business.
To prove worthiness for a small loan, prepare proper documentation. Keep your credit reports as clean as possible. A lender will assume that you operate your in the same manner that you manage your personal finances. The lower your credit rating, the slimmer your chances are of obtaining a small loan.
When applying for a small loan, search for a lender by first approaching the bank or banks in which you currently do business. Since you'll need to share all of your personal and financial information, it can be beneficial to apply with a financial institution that already has that information on file and is perhaps familiar with your profile and spending habits. If your credit rating is high, your changes are good of being approved for the small loan.
If you are unable to work with a bank or credit union in which you currently do business, or if you'd prefer not to work with your bank or credit union for your small loan, look for a lender who wants your business. Search the section of your local newspapers for special financing offers on small loans and other loans. These lenders are actively looking for people needing small loans, and the process of obtaining a small loan with these types of lenders may be easier and faster. Additionally, check into credit unions. Because credit unions tend to be smaller financial institutions, you may be able to speak directly with a loan decision maker. Larger banks and other types of large lenders may have more rigid rules for small loans, and the processes that they employ may be more complicated for small loans.
If, at First, You Don't Succeed
If your first attempt at obtaining a small loan fails, don't be discouraged. Small loans are often not approved with the first lender that you approach, and be assured that you're not alone. Especially if you have a start-up business, lenders don't always approve small loans, even in the most ideal situations. Search for other lenders, or become resourceful and look into other sources for loans rather than a small loan, including home equity loans and personal loans, both of which can be used for purposes.
Rebecca Game is the founder of Digital Women ®, an online community for women in business. A 30 year entrepreneur and dedicated to helping other women find small business loans. Visit her site: Loans for Women
www.digital-women.com
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