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| Business Lending Options for the New or Expanding Business
By Sharon Secor Direct Lending Solutions Staff Writer
A variety of resources are available to aid the aspiring entrepreneur in starting a new business, or help an established business owner improve or expand his enterprise. Often, the chief reason for the failure of a new business venture is a lack of proper funding at the outset, causing a long, uphill struggle that can be very difficult to win. Knowing where to find financial resources and how to take advantage of them is crucial to success in today’s highly competitive market. Combined with a realistic and effective business plan, adequate funding can be the foundation upon which a solid business can grow and thrive. Prepare Before You Apply Preparation is essential when approaching a lender. Showing a strong commitment to your business and confidence in its success is important, as well as a firm grasp on the facts and figures. Make sure you know exactly how much funding you will need and detail how it will be spent to make your business profitable. Good preparation can go a long way towards avoiding a denial that will be noted in your credit report, making the next application more difficult. Among the first steps to take when seeking a business loan is formulating or reviewing your business plan, ensuring it provides an accurate reflection of the structure of your business and your plans for its future. Be prepared to present clear and realistic goals for your business to the potential lender, and a detailed outline of the steps you will take to achieve them. A solid business plan is very important in the approval process, helping the lender evaluate the ability of your business to generate the necessary revenue to repay the loan. You will need to present detailed financial statements and budgets to the lender, and be prepared to answer tough questions on the performance of an established business or the potential of a startup. Confident and succinct answers are the key, displaying your knowledge and competence to the lender. Choosing the Right Funding Option for Your Business The best business loan for your needs depends upon a number of factors. Business funding options include traditional long term secured loans, lines of credit, federal loans and grants, or short term loans, among many others. Determining the right funding choices for your business will require a bit of research according to your particular type of business and its financial circumstances. For the business or startup that requires a large amount of funding, secured business loans are available from virtually any bank that offers business accounts and services. These business loans can be used for working capital, refinancing, acquisitions, or expansion. They generally carry a monthly repayment plan with the term determined by the expected lifespan of the assets for which the funds are to be used, along with other factors. SBA loans can be a terrific option for funding your small business. These loans are administered by the U.S. Small Business Administration, a federal agency charged with assisting small businesses in a number of ways. SBA loan programs set guidelines for independent institutions to provide funding for small businesses, backing the loans to eliminate a portion of the risk to the lender. SBA also offers a number of educational and support programs to aid the success of small business ventures. Short term loans are available for smaller amounts, most often less than $100,000. The terms of these business loans usually extend one year at most, and repayment is generally done in a lump sum at the end of the term. These loans can be a good solution for the business that needs to build up an initial stock of inventory, or for other investments with returns that will be realized quickly. For the business that is subject to seasonal changes in cash flow, a line of credit may be the best option. These business loans allow you to borrow in small increments when cash flow is slow. There is an annual borrowing limit placed on these accounts, and repayment must be done fairly quickly to avoid additional expenses. If capital is needed to purchase business equipment, often the best way to meet the need is with equipment financing. The approval process for these business loans are often less stringent than a more general loan, as the equipment purchased provides the collateral against the balance owed. This method of funding carries less risk than using your business or personal assets as collateral, often making it a good alternative for startups. Whichever funding method you choose, be sure to research the terms and obligations thoroughly to be sure your needs will be met and the costs are manageable. Comparison shopping can be the key to selecting the best rates and terms for your business loan. With a good business plan and the right resources to get the ball rolling, you can build your business into a solid and profitable venture. Useful Resources:
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