How To Finance Your Small Business

| Posted: 27-07-2006 | Comments: 0 | Views: 201 | Rating: (50)

(?)

If you have a great business idea or plan, or you would like to expand your existing business, don't let a lack of funds stop you in your tracks. There is a wide variety of financing available for small businesses. Let's take a look at the financing opportunities that small business entrepreneurs can take advantage of.

While the financing sources comprise diverse institutions, such as banks, government sources, venture capitalist and "angel" investors, it is useful to look at what all lenders, regardless of category, want when they loan money or invest in a business enterprise.

When you seek money for an already existing business, lenders will be interested to know about the history of your business; whether it has a track record of good management and good performance. Lenders will be keen to know whether you have the ability to repay a loan and will look at your present cash-flow to see whether it is sufficient to enable you to meet your current obligations as well as to take on extra debt.

Your credit history will also be under scrutiny. A good credit history will help you to get a loan. If you have had problems in the past, it is best to bring these to the attention of the lender yourself and explain how you have turned the situation around.

You can also bolster your chances of getting a loan by putting up collateral. This reduces the risk for the bank in case you default. And finally, if you can show that your own personal money is invested in your enterprise then lenders will have more confidence in the proposition.

Many small business loans are turned down due to poorly presented proposals, inadequate collateral, insufficient cash flow and a lack of management experience.

These are the general points that lenders and investors are interested in, now let's look at the main sources for small business financing.

1. Traditional Lenders: Banks, credit unions, and finance companies are the main source of loans to small businesses. Many of these institutions have a small-business department and are experienced in handling small-business loans. The most logical place to start is with the institution which handles your business and personal banking. You should do your best to get to know the manager and personnel at the bank. So don't try to save time at the ATM! Being friendly with the bank staff will not guarantee you a loan but it will make it easier for you to make your loan presentation.

2. Government Sources, the Small Business Administration (SBA): The programs of the SBA work in conjunction with the traditional lenders, as they are mostly loan guarantee programs that reduce the risk to lenders in case of default. Some of the popular SBA programs are as follows

a. The 7(a) loan guarantee program: This program helps businesses which lack sufficient collateral, by providing repayment guarantees ranging from 75-85% depending on the size of the loan.

b. The SBA LowDoc loan program: There is only one form to fill out for these loans and approval time is rapid (within 36 hours from when the SBA receives the applications. These loans are only for amounts up to $15,000 but they can be used for start-up businesses.

c. The SBAExpress loan program: This is another quick-procedure loan guarantee program, but it covers loans up to $250,000. The SBA guarantees 50% of these loans, and interest rates in this program may be higher than in the other SBA programs

d. Microloans: These are loans for amounts up to $35,000 which are made by non-profit community based organizations.

3. Venture Capitalists: These are typically firms that are seeking investment opportunities in companies with a high profit potential. Usually when you take money from a Venture Capitalist firm it means that you have to give up some ownership and control to the investors. If you are thinking of going in this direction, then it is imperative to investigate the VC firm, and make sure that it has good references.

4. Angel Investors: These are individual investors who are looking for good opportunities in a wide variety of businesses. You don't have to be a high-tech company to attract these funds. Angels have smaller sums to invest than venture capitalists, and their investments range from $100,000 to $1 Million. There are a good number of angel investors in the U.S. and Canada, with at least 170 investment groups or angel networks spread around both countries. You can find the angels by making a search on the Internet, looking for angel associations in your particular area of business. You can also inquire with your local small business librarian, the chamber of commerce, your local SCORE office and with other non-competitive businesses.

As you can see from this brief survey, the money for small businesses is out there. Prepare your proposal carefully, and approach the institutions or individuals that best match your needs and capacity.

Rate this Article:

Current: 0 / 5 stars - 0 vote(s).

Article Tags: Small Business Loans, Starting A Small Business

Article Source: http://www.articlesbase.com/affiliate-programs-articles/how-to-finance-your-small-business-44263.html

Print article

Send to friend

Publish this Article

Author feedback

About the Author:

Robert Moment is an innovative business strategist and author . Robert show entrepreneurs how to successfully build and grow profitable service-based small businesses. Visit http://www.howtostartyoursmallbusiness.com and download the FREE Special Report "17 Profitable Ways to Turn Your Ideas into Wealth."

Submitting articles has become one of the most popular means of generating quality backlinks and targeted traffic to your website. Join us today - It's Free!

Article Comments

Add new Comment

Advantages of Small Business Loans
By: James Hunt | 27/12/2005 | Debt Consolidation
When starting a new company or business, people may sometimes to get some financial assistance in the form of small business loans. Some current business...

Unsecured Small Business Loan: a Quick Remedy to your Business Needs
By: Angelo Drew | 18/01/2007 | Loans
Business finance is vital to the growth of any business. If you are running a small business and do not want to give security to the lender, borrow an unsecured small business loan.

Let Unsecured Business Loans Work for you
By: Aisha Cristal | 05/04/2007 | Loans
By raising the level of investments, you can help your business grow more. Even if you are short of money, unsecured business loans can help you in making the desired investments.

No Obligation Business Loan Quote: Aid to Choose the Best Deal
By: Michael.t.brian | 20/07/2007 | Loans
No obligation business loan quote is to serve you with a set of chosen lenders from the market from among whom you can choose one, yet this is not mandatory and this is the reason why they are with the tag, no obligation.

Small Business Loans: Requisites and Advantages Unfolded
By: Michael.t.brian | 09/09/2007 | Loans
You can achieve new heights with small business loans. Just keep track of the following key issue that we have discussed in the article and see the difference.

Small Business Finance: Investment for your Business
By: Bonnie Castle | 18/10/2007 | Loans
Small business finance is a loan plan that finance small ventures with or without demanding any collateral. The loan plan has opened its doors for every sort of credit holders and meets the demands related to business.

Business Loans: Cash-aid to Do Business Safely
By: Michael.t.brian | 06/11/2007 | Loans
Business loans are available for doing any business and they are available in both the regular packages, secured and unsecured. You need to place a good layout of your business to have a good deal from the lenders here.

Small Business Finance – Tips for Finding a Suitable Deal
By: Bonnie Castle | 01/12/2007 | Loans
Small business finance provides funds to people who are running small scale business. The finance help meet all smaller or greater business needs. Even bad credit history business people can find the finance on some conditions.

Got a Question? Ask.

Ask the community a question about this article:

Frequently Asked Questions

How to get a small business loan. We only need $5 ...
By: mommapatpat | 26-06-2008
How to get a small business loan. We only need $5,000 and we do not have any collateral. The business is already established. We just need the start up investment. We have $1000. We need more to get started with rent, utilities, etc.

Q&A Powered by:

Latest Affiliate Programs Articles

5 Affiliate Tips for Marketing With Pay Per Clicks
By: Jinger Jarrett | 05/09/2008
Pay Per Click search engines are the fastest way for affiliates to make sales. These tips will show you how to get started quickly and begin earning from pay per clicks almost immediately.

Few Strategies How to Improve Your Leadership on Affiliate Program
By: Erny Setyawati | 05/09/2008
Affiliate program is so familiar between internet marketers or people always do business on the net. But as matter of fact not all people success doing affiliate program, almost 75 % failed in this business and desperate to continue.

Wealth Building: Passive Income For Retirement
By: Hector Milla | 04/09/2008
Those people that face their retirement with a just a little social security have a big problem, have not they? even if you are younger you should be thinking in some way of passive income that helps you in your future, this is basic on all wealth creation process, if you want to be rich or just make some extra money, online or offline consider this kind of income as a must.

Affiliate Marketing Golden Blueprint
By: Murtuza Abbas | 04/09/2008
How to succeed using the massive cash power of affiliate marketing?

Simple $1000 Per Month Article Formula
By: Murtuza Abbas | 04/09/2008
How to earn thousands of dollars using the massive power of articles?

How To Use An Affiliate Marketing Program Website To Your Advantage
By: Deep Arora | 04/09/2008
Once you have created and launched your own website, then you are faced with one of the biggest challenges, attracting traffic. Basically the more people visit your site then the more successful your business is likely to be.

How to Earn Extra Money at Home With Profit Lance
By: Melissa Ritter | 04/09/2008
What is Profit Lance? Profit Lance is your answer to earning real money online whether you are new to internet marketing, or have already had some success.

What are the Characteristics of a Profitable Affiliate Program
By: Kishore Rajput | 04/09/2008
Selecting of the right or rather a profitable affiliate program is the cornerstone of success in affiliate career. Amongst literally thousands of affiliate marketing programs being launched every other day by different types of entrepreneurs short listing of those may sound a daunting task at first.

More from Robert L Moment

God’s Big Idea for Your Business
By: Robert L Moment | 30/06/2008 | Small Business
Is your “Big Idea” for your business in line with God’s idea for your life? How can we tell?

How to Handle Customer Complaints
By: Robert L Moment | 25/02/2008 | Customer Service
Turn customer service complaints into sales. Learn how to make every customer interaction count.

Seven Steps to Achieving Small Business Success
By: Robert L Moment | 05/02/2008 | Small Business
There is a formula for small business success. Follow seven proven strategies for small business success.

Seven Realistic Ways to Achieve your New Year’s Goals
By: Robert L Moment | 27/12/2007 | Goal Setting
Have you ever completed all of your New Year's Resolutios? Learn seven realistic ways how you can achieve all of your New Year Goals .

Black Women Entrepreneurs : the 7 Traits to an Exceptional & Successful Business
By: Robert L Moment | 09/12/2007 | Entrepreneurship
Black women entrepreneurs are turning their passions into profits. Black women entrepreneurs are starting exceptional and successful small businesses.

7 Steps to Creating a Successful Small Business Marketing Plan
By: Robert L Moment | 08/11/2007 | Marketing
Small business marketing is the key to attracting your ideal customers for growth and profit.

7 Costly Small Business Marketing Mistakes Every Entrepreneur Must Avoid
By: Robert L Moment | 05/11/2007 | Marketing Tips
There are 7 costly small business marketing mistakes that every entrepreneur must avoid to have a successful business.

Six Keys to Creating “wow” Customer Service Experiences
By: Robert L Moment | 08/10/2007 | Customer Service
Creating "Wow" customer service experiences increase customer retention, loyalty, and profits. Exceptional customer service is about creating the ultimate customer experience.

Article Categories

Article Marketing

Article Notepad

Stop Duplicate Content

Term Papers

Follow ArticlesBase at http://twitter.com

Need Help?

Sign up for our email newsletter

Receive updates, enter your email below

Use of this web site constitutes acceptance of the Terms Of Use and Privacy Policy | User published content is licensed under a Creative Commons License.
Copyright © 2005-2008 Free Articles by ArticlesBase.com, All rights reserved. (0.21, 17)

How To Finance Your Small Business

Article Comments

Related Articles

Got a Question? Ask.

Latest Affiliate Programs Articles

More from Robert L Moment

Need Help?

Site Links

Webmasters

Business Info

Sign up for our email newsletter