HOW MUCH? - Small Business Loans

Introduction To Small Business Bank Loans

   
 

Perhaps you are one of the thousands of people impacted during this current economic crisis. You are considering starting your own business, but you are not entirely sure what types of bank loans are available to you. We would all love to just walk into our bank and sign our name to a loan agreement and start our business tomorrow. However, this is unlikely to happen. Proper planning and an understanding of business loans can help you get started with your small business.

Getting Started With Your Small Business Loan

Before you begin the process of applying for a bank loan for your small business, you will need a well thought out, thoroughly researched business plan. Your business plan should include enough information so that a lender will know that you understand the operation of the business. In addition to the overall plan for your business, you will be required to provide complete financial information.

Financial Information in Business Plans

Your business plan will not contain all of the financial information required by a lender. Other things that your bank will require to provide a small business loan include:

- Purpose of Loan
- Length of Time Needed for Repayment
- Amount of Loan
- Collateral
- Personal Guarantee (will you provide)

Loan Proposal

When your bank reviews your business plan, they will also ask for a loan proposal. Items that should be included in your financial proposal include:

Collateral - secondary source if you cannot generate income
Capacity - ability of your business to generate income to repay loan
Character - review of your personal financial credit

Small Business Administration Loan Guarantee Programs

The SBA is not in the business of lending money - instead, they guarantee portions of your small business loan to a lender. These are the basics of the guarantee programs offered through the SBA:

Small Business Store
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7(a) SBA Loan Guarantee - The bank receives a partial guarantee from the SBA that the loan will be repaid. These are the most common SBA loans and the guarantees may be between fifty (50) and seventy-five (75) percent of the loan.

Special Purpose Loan Guarantees - Support export markets, help firms affected by NAFTA and can help employees take ownership of an existing business.

Micro-Loan Guarantees - These are just what they sound like. Very small lenders (typically private lenders) provide these small loans. Typically, these loans are too small for a bank to undertake. The loan amounts are under $35,000. You must prove you have been unable to get financing to qualify.

504 Loan Guarantees - This is an economic stimulus loan. To qualify you must be able to demonstrate you can create or keep one job for every $100,000 that you borrow. These guarantee programs are limited to manufacturing jobs.

Summary

If you are one of the millions who lost a job and are considering a small business endeavor, you will more than likely need some type of financing. Small business bank loans can help you get started. Understanding the proper category of your small business loan can help you determine whether you qualify for a loan guarantee. Great credit, a great knowledge of your business field and a strong business and financial plan are all-important factors in applying for a small business loan.

See also: Peer To Peer Loans

 

 

 

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