The type of loan you need for your business will depend on what you’re trying to accomplish. If you are just starting up, a loan to cover the costs of opening and running your business until you make a profit is what you are looking for. That is a standard loan and you can obtain one from most banks or lenders.If you are looking for any type of business loan a good place to start is with the SBA, known as the Small Business Association. The SBA also has micro loans for businesses that are already in operation, but need capital for purchase of equipment, bigger facilities, supplies or other fixtures.The SBA does not actually provide the money. With these programs they guarantee your loan, so banks can feel more comfortable lending you money. The SBA can also give you assistance in determining the kind of loan you need and the amount you should be asking for. For larger amounts of money needed for bigger projects such as buying a building for your business, renovating an existing building, buying equipment and other big expenses up to a million dollars, the SBA also offers a 504 loan program.With any of these programs you will need to prove your business fundability in order to get the loans. You can find out more about how to show proof of your business’ financial stability at http://www.businessfundability.com. Some loans, like the 504 loan program, have an unusual setup. Unlike a traditional loan, these programs may have three or more tiers of lending.Typically a 504 loan in the amount of $1,000,000 will have a 1st lien for the initial $500,000 of the loan, a 2nd lien for up to $400,000 of the loan and a required contribution from the borrower of as much as $100,000 to prove good faith. The numbers vary for figures less than a million, but the ratio will remain about the same.If your business fundability isn’t as good as it should be, the borrower contribution ratio will likely be higher. There are strict requirements as to where you can obtain the funds for your share of the money as well. While it seems like dealing with the SBA is difficult, once you have established a good reputation with them, you will have an ally on your side for all future loans.You can obtain much the same types of loans directly from a lender without SBA backing, but it will be more difficult unless you have perfect personal or business fundability. 

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Getting a loan can be frustrating and very time consuming. The SBA, also known as the Small Business Association, makes it a little less frustrating and can really cut down the time involved considerably.  There is a little bit of confusion over what a SBA loan bank is. Many new business owners believe that they can go to the SBA website and apply for a loan. That isn’t the case. The SBA does not actually give loans. Another misconception is that SBA loans are “free money” or grants. That is not true at all. SBA loans are actual loans that must be repaid and will incur interest over the course of the loan just like any standard, traditional bank loan. What happens is a business applies for a SBA loan approval. The process with the SBA is in some ways even more involved that the bank loan process. When the SBA approves the business, they are putting their stamp on it, and giving bankers the assurance that the SBA will back the loan if the business defaults. That’s why it can be complicated to prove your business fundability with the SBA. However, once you get it, you can go to any bank that offers SBA loans and virtually walk out with a loan. The road work has all been done. What You Need to Obtain an SBA Loan Along with a business plan and financial statements for your business and possibly your personal finances as well you will need the following to accompany your SBA loan application: • Lease for any business property • Franchise or purchase agreement if applicable • Article of incorporation • Proof of licensing • Letters of reference • Partnership papers if there are more than one owner An Important Note on Financing for New SBA Loans If your business has not had a chance to prove its business fundability you will likely need to use your personal credit to back your SBA loan. If that’s the case, your personal credit must be very good. If that is a problem you may need to look for alternatives to an SBA loan. You can find information on other business startup loans on www.businessfundability.com.

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When you apply for a loan there are certain things lenders look for to determine your business fundability. These are the minimum items to check on your own to make sure a lender will see what they need to approve your financial needs.Solid Business Credit ScoreExperian, Equifax and Dun & Bradstreet are the three business credit reporting agencies that you should watch to make sure your scores are strong.DiversityYour lender will determine your business fundability based on the types of credit you have as well as the strength of the scores themselves. They don’t want to see only one type of credit, they want to make sure you are solid in all types of business credit and have a reliable record of timely payments. You should have a minimum of 5 vendor credit accounts and 3 different credit cards in your business’ name. If you have been in business for any length of time, another bank loan that is current and in good standing or has been paid off recently shows new lenders that you are a good risk.Business CredibilityYour business fundability will hinge on the reputation you have developed in business circles. Having good standing with vendors is one way to prove your credibility, but other B2B relationships strengthen your standing in the business world and make your business look more reputable. Spend the time, even when you are just beginning to create business relationships.Minimum Bank RatingYou need to have a good bank rating for your business. This is one of the easier things to develop. Open a bank account in your business’ name. Maintain a healthy balance that is at least at the minimum level for that account for several months. A normal bank cycle is 3 months so that is the minimum amount of time it will take to start with for a bank rating.During that time you should show good cash flow, paying your bills and having the income to cover all expenses without digging into your minimum funds. The longer you can keep your bank rating going, the stronger your rating will be.Proper RegistrationYour business should be listed with 411 at the least. It is even better if you are a member of any organizations affiliated with your type of business and have a good, strong relationship with local business associations and the Better Business Bureau.

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To a traditional lender the only really important aspects pertaining to business fundability are can you pay and will you pay. That’s why it is so important to create a good business credit profile and to be able to show a reasonable expectation for profit with your business when you apply for a loan from a bank or finance company. What are Reasonable Profit Expectations? It isn’t quite enough to show your business will make money. You have to show that your business will make enough money to both repay the loan and stay in business. To show the proper level of expected profits needed to prove your business fundability it should have at least a 1.5 ratio of profit to loan. That means if you are applying for a $20,000 loan, you will need to show that your net profits (the money from all income after expenses) will be at least $30,000 over the course of the loan period. Will you pay is often harder for new businesses to prove. Having good personal credit is good, but you really don’t want banks to use your personal credit to back a business loan. There are two reasons to avoid that situation, the first is it doesn’t help build your business credit and the second is it puts your personal finances at risk should your business have difficulty paying back the loan. Borrowing From Friends and Family There are some advantages to borrowing from friends and family, but it can come at a big cost. Friends and family that are willing to invest in your business may expect to have input in your operations even when they aren’t capable of making decisions or to give advice. However, friends and family can be a great deal more lenient if you have trouble making your payment on time and may give you a break on interest. If you choose to accept money from friends and family weight the option carefully and make sure everybody’s expectations are well understood and in writing. Even loans from friends and family can affect your business fundability when looking for future loans. Make sure that if go to a traditional lending source after you have accepted loans from friends or family that you let the future lender know that existing loans are “friendly credit” and may be subordinate to the new loan.

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As the economy makes its rebound, entrepreneurs are also doing their part for them to maintain close contact with certain business financing opportunities for their companies. Due to the recent recession, even personal credits are being assessed on top of entrepreneurs’ business credit before coming up with a loan approval. [More]

Business Loans, General

Business credit cards are used every day for different kinds of purchases. They are efficient replacements for cash. Oftentimes, this efficient convenience turns into a habit that eventually leads to debt. For this reason, it is very important to learn how to use business credit cards responsibly. [More]

Business Credit, Business Loans, General

One of the most useful business financial assistance a business company takes advantage of is the business revolving line of credit. It offers the business owner the convenience it needs whenever he or she needs financing, especially during tough times. [More]

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