Small Business Loans and Financing

By: EconomyWatch Content   Date: 1 December 2009

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Finding small business loans and financing for your entrepreneurial requirements is an crucial step for long term success of your business. There are various sources from where you can fund your business. These include:

·        Business grants

·        Small business loans

·        SBA loans

·        Angel investors

·        Venture capitalist groups

Small Business Loans and Financing Options

Let us look at each of these loan and financing options in detail.

Small Business Grants: Small business grants are available through state-sponsored programs and other private entities. A good place to search for these grants is the Catalog of Federal Domestic Assistance (CFDA). Ideally, as with other business loans, you should prepare a quality business plan listing all information about your business, projected profits, cash flow, etc.

Small Business Loans: Getting a small business loan depends on many factors and your ability to produce perfect documentation. Your credit history is critical if your business doesn’t have a history of being in operation. Banks generally assume that you operate your business in the same way you manage your personal finances. Next, show the bank executives your venture’s financial statements for assessment of its financial health and worth. Also, prepare a detailed pro-forma of your business and project how it’ll grow going forward.

Finally, prepare an updated business plan with details of your partners, strategies, advantages, etc, at hand Remember not to include any information that gives the slightest indication of any fraudulent act or accounting irregularity.

SBA Loans: The Small Business Administration (SBA) facilitates the funding for your business by acting as a guarantor when you borrow from traditional lenders. SBA 7(a) loans are available if you do not qualify for financing through banks or credit unions. To guarantee the loan, SBA requires that you must have at least 20% ownership in the business. You may also need to put up collateral to secure the loan. You can secure up to $2 million under the SBA 7(a) program.

Angel Investors: Angel investors are individual investors or an investment management firm that would invest in your business looking for a high return on their investments. Usually they are the bridge between the seed capital and the venture capital. Funding estimates vary, but usually range from $150,000 to $1.5 million.


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