Small Business Loan Source has great importance in course of securing success for the business. Small Business Loan Sources are those from which small businesses get their required credit financing. There are various small business loan sources. Small business owners can choose their loan source according to their personal requirement and personal capability of repaying the loan. The main sources of small business loan are:
Micro Loans
Micro loans are the main source of accumulating capital to start up a new small business. Term of repayment of micro loans vary according to the amount of credit. But the maximum term of micro loans can be six years. The borrower has to provide some form of collateral along with personal guarantee to the lender.
Eligibility Criteria for getting Micro Loans:
The borrower has to acquire complete business training.
Presentation of an impressive business plan and proper marketing strategy is a must.
There must be high chances of generating good amount of profit.
Government Loans
Governments in every country provide easy loans to the small businesses with the objective of promoting them. A small business can apply for govt. loan of any amount as there is no upper limit on amount of govt. loan. The term of repayment of the govt. loan is generally fixed by an agreement signed by the borrower and the government.
Eligibility Criteria for getting Government Loans
Submission of a strong Business Plan along with the plan for making profits is required.
Government needs to be assured that the business man will take sincere effort to turn his new venture into a profit making enterprise. Government believes that if a person puts his own personal savings in his start-up business he certainly becomes much more success-driven. So, those new businesses whose owners have invested their own money in the businesses can get govt. loans with much ease.
Terms of repayment of loan needs to be discussed evidently.
Owner of small business who is interested in taking govt. loan should not have any criminal record.
Govt. also provides some special loans for the worthy businesses and for the people who are apparently unemployable. This kind of loans include loans given to elderly people for starting small business, loans for minority people to set up new business and loans for equipments, rent and other operating expenses to the worthy businesses.
Bank Loans
Banks provides loans to small businesses frequently. But one must be aware of the debt and interest associated with a bank loan. So, signing of a general agreement between bank and the borrower is very important. For getting a bank loan a small business owner has to produce proper growth plan and proper estimation of financial profits before the bank. In some cases getting a bank loan may be proved to be relatively difficult than getting other kind of loans.
Loans by Big Business Organizations
Large business houses provide loans to small businesses, but in most of the cases the big corporation wants the borrower to be engaged in some form of partnership with the large business enterprise. Before sanctioning a loan to a small business, the big corporation considers the factors like locality of the small business, target market of the small business, growth prospect and expansion plan of the small business.
Franchise Loans
There are many Franchise companies who provide financial assistance to small businesses. They also help the small business enterprises to find a lender as many franchise company maintain a list of favored lenders.
Export Financing
These loans give support to export financing for the small businesses. This kind of loans can be availed by giving guarantee of repayment of the loan in the required time frame.
Other than the above mentioned sources of small business loans there are different associations and various programs which provide monetary assistance to small businesses in form of loans.