Once you have examined your own financial situation you can approach lending institutions with more confidence. Remember that most banks and financial institutions require that you put up a third of the total start up costs and that it is unrealistic to seek out all the funding you need from a bank loan. We have already gone over some alternative sources of income or money to raise that third of the start up costs, but what about the remaining two-thirds? Any of those alternative sources of income could help you with the remaining two-thirds. The truth is, few businesses are able to open their doors without some kind of financial help from a loan.
Bank loans are becoming increasingly popular because banks are more and more willing to make small business loans, but usually only in the event that the borrower has some collateral (real estate, securities, equipment, etc.). You will also be required to convince the lending officer that your business has a reliable cash flow which will enable you to make your loan payments on time. Do the research and call around to get interest rates from a variety of different lending institutions. Also, prepare your documents; make sure to have a solid business plan and a loan proposal in hand when you approach a financial institution for money.
Venture loans are small loans of up to about $5,000 that you can get without having any equity. These loans are local, and depending on where you live you might be able to get a venture loan from your state or local community. Venture loans are intimately tied to job creation, so in order to get these loans your business has to be geared on some level towards creating more jobs in your community and affecting growth and change.
SBA loans are offered by the federal government to help promote the growth of small business throughout the United States. With government loans you still have to go through the bank, so ask your loan officer if you qualify for an SBA loan. Although government loans usually require collateral, like traditional loans, they may charge higher fees. The up-side to an SBA loan is that you can get them for a longer term than traditional loans.
Consider using a seed-funding firm, or a business incubator. These are companies that will invest in and sometimes provide a place of business and some types of general office equipment, in order to receive a return at a later date. As of 2006 there were about 800 business incubators in the U.S. Finding seed funding firms is easy as doing an Internet search and sending an email. The downside is that seed-funding firms usually have cookie cutter investment processes, which may not be suitable to your needs.
Franchiser loans are useful for those opening a franchise because the franchiser is a good funding source. Reputable franchisers will assist you in obtaining financing, or will be able to refer you to interested lenders that they have worked with before. Lenders are more inclined to loan money to franchises because they tend to be more successful than start ups that begin from scratch.
Posted in 
Tags: 