At Last-You Can Find Your Small Business Loan
A Home Business Article Contributed by G. Uma Bennett
At Last-You Can Find Your Small Business Loan
Most business owners will tell you that finding a small business loan is the most frustrating aspect of running their small businesses. The need for day-to-day working capital to keep your business running is a major challenge. Banks are not the best place to seek financing of less than $10,000 to start or sustain a business. For funding in these small amounts, check with your local Small Business Administration office for information and applications for the program that is right for you. The "Micro Loan"; the "Low Documentation Loan" and the "Pre-Qualified Loan".
Small Business Loans-How a "Micro Loan" Works
Small Business Loans in the form of "Micro Loans" started over a decade ago, with funds channeled through non-profit intermediaries to extend financing to small businesses. This is an ideal program for small businesses, with loan amounts average about $10,500, from as little as $100 up to $35,000. Repayment terms depend upon the amount of the loan, the proposed use of the funds and the regulations of the intermediary lender, with competitive interest rates, but the maximum term is six years.
Assets being purchased with the loan will be held as collateral, and the business owner is required to sign a personal guaranty.
Navigating Through Your Small Business Loan
Documentation preparation for your small business loan is the most important aspect to consider. Have a narrative business plan-lenders want to see where their money is going. Include future profit-and-loss projections for three years-be realistic about your figures. Let the lender know who will be responsible for handling the money-with resumes on key managers and owners. What are the assets-outline of how the loan will be utilized.
How you have managed money in the past-at least three years of historical financial statements on the company as well as personal financials statements and tax returns on all owners.
Proposing to Your Lender-a Small Business Loan Plan
The success of getting a small business loan rests on making a convincing proposal. Your business plan should be concise and to the point-four to five pages is usually enough. In those pages, you must summarize the key areas of background, purpose, marketing, profits, management, operations and repayment. The most important part of the plan is to demonstrate that the business idea has been thoroughly considered from all angles.
The business plan is the means that your lender uses to understand your business, making sure that it is clear and to the point will benefit your relationship with your lender for the duration of of your small business loan.
Surviving the Small Business Loan Microscope
When seeking a loan, be prepared to answer these questions: Why do you want to start a home business? How much of your own money have you invested? How much money do you need and for how long? What is the purpose for the money? How do you plan to repay the loan? What type of collateral do you have? Why should you be given this loan? What experience do you have in this industry? Do you have experience operating a business? What is your plan "B" if this business fails? It is best to prepare yourself to become comfortable when asked these types of questions in exchange for funding.
