Feeding the Beast: Will a Small Business Loan Fill Your Monster up or Will It Eat You out of House and Home?

A Home Business Article Contributed by Donna M. Brown

A Personal Savings Plan is the Best Source for Your Small Business Loan

Most banks require an operating history before they are willing to invest in you by giving you a small business loan. Keep in mind that your personal savings could be a primary source of financing for startup costs if you start saving now. Through hard work and sacrifice, you can fund your own dream without risking enslavement to a financial institution.

Your Small Business Loan is Waiting for You - Somewhere

If an amazing small business opportunity has revealed itself to you and you just don't have the cold, hard cash to finance it, remember there are many alternatives to getting a conventional small business loan.

Don't overlook the Small Business Administration's (SBA) ability to help with a loan guarantee. Banks are more likely to consider a small business loan backed up by the SBA.

Don't ask for more money than you need. This beast you have come to know as your business may seem to always be hungry, but be careful not to over feed it. You want it to survive and thrive, but don't let it eat you out of house and home.

Just How Much Money Do You Need from a Small Business Loan?

Determine what you need the money for.

Will you:

Pay rent?

Use it to make payroll?

Buy equipment and fixtures?

Pay franchise fees?

Make a list of your needs, how much you expect them to cost and then prioritize them. You might like to have a million dollars, but if you can get by on $500, 000 then that is the amount a bank is most likely to consider

Once you have made your list, come up with a clear strategy. Consider cost-saving measures and find ways to save money and still be effective. You might want top of the line furniture and a new car, but can you get buy with mid-grade furniture and the car you have now until the business begins to flourish? Bankers who are consider a small business loan will ask these questions and want to know that you have made the best decision based on solid information and realistic needs - not wants.

Before tapping into a source of credit, review your reasons for needing cash, the amount of time that you will need it and how much you are willing to pay for the privilege of using someone else's money. Some credit is granted on an unsecured basis, but most small business loans want you to have hard assets on the table before they will commit to taking a risk on you. Maybe what you need is quick cash for a short amount of time.

You could borrow the money against a credit card if you need a very short-term loan and pay it back the minute your "ship comes in."

Seek an unsecured line of credit that won't tie up your personal assets. Some of them are high-interest with payment terms that can be difficult to handle. Do your research and know with whom you are getting involved before you accept a check.

Be extra nice to friends and relatives, they could be just the ones to bail you out of a bind when you are running low on operating capital.

Your hungry beast - your business - will be much more content and easy to get along with if you plan meal times ahead of time. Before you know it, that beast will be working to feed itself.