A crucial part of starting any new business is securing the necessary cash flow. Prospective small business owners may believe that the current uncertain economy means this goal has become particularly difficult. While it remains true that many lenders have tightened their requirements, getting the funds you need becomes simpler once you have the right information.
Lenders usually consider several factors before making a small business loan, including the business partners’ general character and personal and business credit histories, their access to solid collateral, and the soundness of the business project.
Give careful thought to the selection of your lender. A larger institution may find a smaller loan more trouble than it is profitable to administer. A bank with which you already have an established relationship may be the best first choice, as are credit unions and local banks. The United States Small Business Administration may offer a loan that fits your needs, although you and your company will have to meet eligibility requirements. In general, government loans offer lower interest rates and relatively favorable terms.
Discuss with a loan officer the documentation you will need. Most will require credit history, current and projected financial statements for your business, figures showing anticipated cash flow, a well-organized business plan, and personal guaranties from all owners.
If banks consider your credit history unacceptable, you may still be able to find funding from less traditional sources. Consider any of numerous crowd-sourcing websites, or calculate the value of borrowing from family members or placing start-up expenses on a credit card.
Visit the website of the Small Business Administration at http://www.sba.gov. There you will find extensive information about all aspects of getting your company up and running, including tips on obtaining a loan.