Bank Small Business Loans

By: EconomyWatch Content   Date: 30 November 2009

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When you first start your business, a business loan is what keeps you going. If you own a small business, the loan depends a lot on the nature of your business. Irrespective of whether you are a start-up or an established entity, bank small business loans are offered at a lower rate of interest than a line of credit, which makes them an attractive option for most business owners.

As a general rule, banks never provide 100% financing. Start-up companies typically must contribute at least 25% to 35% of the costs. The contribution requirements can vary, however, depending on the stability of your business and the value of the collateral used to secure the loan.

Bank Small Business Loans: Steps

·        Your credit history is critical if your business does not have a long history of being in operation. Banks generally assume that you operate your business in the same way you manage your personal finances.

·        Next, you need to show the bank executives your venture’s financial statements for the assessment of its financial health and worth. Also, you will need to prepare a detailed pro-forma of your business and project how it will grow going forward.

·        Finally, prepare an updated business plan. Keep all details of your partners, strategies, advantages, etc., at hand and give the banks as much information as possible. Remember not to include any information that gives the slightest indication of any fraudulent act or accounting irregularity.

Bank Small Business Loans: Choose the right bank

After you and your partners have prepared the documentation that will clinch the deal, it is time to ask for the money from the right bank. A good place to start is a bank that you already have existing business with. They know your business and financial history, and therefore the risks are minimized to some extent. In addition, if you have taken a mortgage with a bank, that is also a good place to start asking about small business loans.

Another way to choose the right bank is to find one that actually looks to grow its business lending arm. You can search for these banks online or tap your professional network. Working with such banks requires little effort and if you are lucky, you might get a good deal on the rate of interest.

A third option is to look at various credit unions. Credit unions usually have flexible lending rules and you may speak directly with the top executives or decision-makers, which otherwise is almost unthinkable in the case of bigger banking establishments.


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