Small Business Loans

I personally prefer to boot strap a company. In other words, live really lean and use the internal profits to fund the growth of a company. However, in many instances it is necessary to obtain a small business loan in order to fund the growth of the business. Some times business loans are need to execute on a business idea. In either situation, I would strongly council anyone to be very careful when doing this and go into it with both eyes wide open. In most instances a Personal Guarantee is required to secure a small business loan. This means that if the company does not pay off the loan, then you are responsible. No exceptions. I have been stung more than one time by these.

One of the best small business loan sources is called SBA. Or Small Business Association. These are funded by banks, but backed by this institution. This is used as a catalyst to spur the economy on.

Below I have listed a few basic tricks or things to watch for if you are considering a small business loan:

• Most lenders (including the SBA) will want to see your business plan. Make sure you have at least a basic plan including financials. It does not have to be fancy, but is vital for your success.
• Keep your lenders informed on the status of your business: the good and the bad. Surprises are not good. Most lenders can handle adjustments to plans if you keep them informed and apprised. Odds are you are going to need to return to the well as some point and the key thing you don’t want to do is destroy your loan reputation.
• If you are not able to make a loan payment on time, call your banker in advance, tell them what the problem and request the extension you need. Then kit the revision. Don’t make unrealistic promises that you do not keep. This will kill your reputation.
• Most lenders will do a personal savings and corporate credit check through a credit company. Be fully prepared to discuss any prior credit problems/issues. The best access to a lender is through a referral. Lending is a people business. Have your CPA, attorney, or friend introduce you to a lender.
• The first thing that will discourage a lenders or investors is the thought that you are not realistic and just a lot of talk not being able to execute your business plan. Avoid giving the impression of being an unrealistic business owner. Doing a worse case scenario with financial numbers is a good idea.
• As a start-up business, do not plan to spend money on expensive meals and travel and entertainment. Your lenders will be more interested in knowing how their money is being used to grow your business.
• When going before the potential lender be well groomed and dressed. Appearance at bank meetings is important and will help.
• Do not depend on a bank to loan you money to start a business. Most small businesses are funded by personal savings or funding from friends and family.
• Make a shrewd appraisal to minimize your risks and to limit losses to a preset level.
• "Your suppliers and vendors can be sources of funding. Some types of financing from your can suppliers include:
  • o Furnishing or financing of equipment, signs or inventory.
    o Advertising and promotional programs
    o Longer payment terms
    o Advertising and marketing assistance
• Don’t forget to consider negotiating exchange of services or trade with your suppliers or vendors. This can be a great way to finance and help your business along.