Government Small Business Loans
Government small business loans help put your own business within reach. First there’s the quest for a decent location, then comes building a customer base, followed by all the initial hiccups of generating a cash flow before your business grows roots and gains momentum. The beginning of a business is crucial because it’s when you gain or lose market credibility. If you disappoint your customers, they may not give you a second chance. If your business gets off to a rocky start (most do), and you believe you can recover but need further financing to make this happen, you can apply for government small business loans.
For-profit lenders are reluctant to issue loans to anyone who does not have a strong credit report and financial history. That is not the case with government small business loans. Obviously, a decent credit report is important, and you will have to follow the guidelines regarding the repayment period and the interest rate set by the government, but usually the interest rates charged by government loans are lower than those you could expect in the private sector.
More about Government Small Business Loans
Government loans are typically offered through banks and credit unions that partner with the Small Business Administration (SBA). The SBA is a U.S. government body, with the motive of providing support for small businesses and entrepreneurs. For each loan authorized, a government-backed guarantee offers serious credibility, since the lender knows that even if you default, the government will pay off the balance. These loans can be applied to a number of uses, such as:
- Purchase of new equipment, machinery, parts, supplies, etc.
- Financing leasehold improvements
- Commercial mortgage on buildings
- Refinance existing debt
- Establishing a line of credit
Government small business loans benefit both small businesses and the lending agency. For small businesses, it is beneficial because this is money capital they may not have access too. For banks, the loan’s risk is decreased due to the loan being backed by the SBA.
Different SBA Government Loans
The SBA extends financial help through various lending programs it has to offer. Some of the more popular loans are:
- 7(a) Loan Guarantee Program: aimed primarily in helping a small business start or expand its services. The maximum size of such a loan is $5 million.
- MicroLoan Program: mostly used for short-term purposes, such as purchase of goods, office furniture, transportation, computers, etc. The maximum amount is fixed at $50,000.
- 504 Fixed Asset Program: featuring fixed-rate and long-term financing, these loans are aimed at applicants whose business model will benefit their community directly, either by providing jobs or bringing needed services to an underserved area. Again, the maximum amount is $5 million.
- Disaster Assistance: under this program, loans are sanctioned to renters or homeowners with a low-interest, long-term plan for the restoration of property to its pre-disaster condition.
In most cases, maintaining a good business credit report is enough to qualify. In addition, it instills confidence not only in the lender, but also in you. There is at least one SBA office in every state in America. If you contact them regarding the startup status of your business model and plan, you can get started on a government small business loan that will give you the financing to make your dreams a reality.
How to Get a Business Loan
Sooner or later most small businesses need to know how to get a business loan, whether to get the operating capital for business startup or to finance an expansion. But whether you re approaching a bank or a friend for a business loan the lender will have the same expectations.
You can greatly increase your chances of successfully securing a loan by being prepared to meet those expectations.
Put yourself on the other side of the desk for a moment.
If someone asked you for a small business loan, you d want to know exactly why he or she wanted the money and what the chances were that he or she would repay the loan in full and on time.
The key to getting a loan is preparation. First, gather together the documents that will help persuade the lender that a business loan is necessary and that you are a good risk.
- A business plan – The business plan shows the lender not only why you want a small business loan but what you plan to do with the money. Don t have one yet? Here s a simple business plan template you can use.
- Cash flow projections – What s the first question any lender has? Will you be able to repay the loan? Your business s cash flow projections give lenders concrete financial data that they can use to assess this risk.
- A statement of your personal financial status – A list of your personal assets and debts to give the lender a fuller financial picture.
You may also need these documents:
- Past business tax returns – If your business is established and you have past business tax returns, it s a good idea to take them with you. They ll give the lender a better idea of how your business is doing financially.
- A credit rating report – Basically, you establish a credit rating by buying things on credit and paying back the money you owe. Your loan repayment history plays a big part in establishing your credit rating, but all your credit dealings make up the history that s used to determine your credit rating.
It s not necessary that you include a credit report with your small business loan application; it s easy enough for potential lenders to check your credit rating. But if you don t know what your credit rating is or suspect your credit rating is tarnished, you may want to get one.
In the U.S., you can get a free credit report once a year through the website AnnualCreditReport.com. For more information, see How to Get a Free Credit Report.
In Canada, you can get a free credit report by contacting one of the two credit reporting agencies, TransUnion or EquiFax Canada. To receive your free credit report you will need to mail or fax one of these companies a request along with copies of two pieces of I.D. Note that you will not be able to get a free credit report through the website of either company; you will be charged a fee for an online report. CreditKarma provides free online credit reports through much of Canada.
The credit report you receive will include information on what to do if you find errors in the report. If you have a poor credit rating, you will want to take steps to repair your credit rating before trying to get a business loan.
Making the Presentation to the Lender
The next step in how to get a business loan is to persuade the lender that your business is viable and you are a good credit risk.
You need to prepare in advance to make a winning loan presentation.
Start by considering the lender s point of view. You want money. But he or she is most interested in the answers to these two questions: What are you going to do with the money? and Are you a good risk? , and to make a successful business loan presentation, you need to come up with the right answers to these two questions.
Answering the first question means being fully conversant with all the details of your business plan and being able to point to the relevant financial statements, charts or graphs that will help convince the lender that you need the amount of money you re asking for to do what you want to do.
Answering the second question means having already given some thought to the credit risk you represent to the lender and being ready to address their concerns.
To get a small business loan, be prepared to tell your potential lender:
- What collateral you have – Collateral refers to the tangible assets that you are willing to put up to secure the loan. These assets might be equipment, a house, a car – something of value that you own. If you fail to repay the loan, then the proceeds from the sale of the assets are used for repayment.
- How much money you re personally willing to put into the business – Being willing to risk your own money shows the lender that you re committed to the enterprise.
- Your expertise and/or experience in your chosen field – Because the success of your business is dependent on this to some degree, any potential lender will want to know more about you. Be prepared to talk about yourself when you apply for a small business loan – your background, your expertise, and even your aspirations.
How to Get a Business Loan? Be Prepared
Your chances of getting a business loan will be greatly improved if you have all your documents in order and are prepared to assuage the lender s concerns about loaning you the money. Think of it as a presentation to an important client or customer, and you ll have a better chance of success.
Read more about getting a business loan:
How to get a business loan, options & requirements, Business Victoria, getting a business loan.#Getting #a #business #loan
Apply for a business loan
Not what you’re looking for?
- Choosing a loan you need
- Improve your loan approval chances
- Risk assessment
When applying for a business loan, it’s essential to prepare a detailed business plan and fully inform the lender about your proposed venture. This information helps the lender to provide you with the right type of finance and advice.
Deciding that your business needs a loan is only the first step. There are a number of things to consider before you approach a lender:
- how much do you need to borrow?
- what type of loan will you need?
- how long will you need it for?
- can the business afford to repay the loan, interest and any one-off or ongoing fees that come with the loan
- what security can you offer the lender and how this affects the interest rate offered.
Online repayment calculators are a good tool in researching options but make sure you take the following into account:
Access to funds you borrow
If you need to access the funds on a semi regular basis to help with cash flow to keep the business operating while waiting for your customers to pay for goods, ‘at call’ loans such as an overdraft or line of credit are designed for this purpose. However, if you need the funds to buy a new business or equipment to expand your existing business you will need the funds ‘upfront’. This is also known as a ‘fully drawn advance’ and provides you with the entire loan amount all at once.
Loans provided upfront will need a portion of the loan plus interest paid back at regular intervals. The repayment amount will depend on the term or length of the loan. To determine the loan term suitable for your business you will need to calculate how much you can afford to service the loan. Be aware that the longer the loan term the more total interest you will pay. Loans that are at call have no fixed terms.
This is the average amount of an overdraft or line of credit that is used at any one time. For example, you may wish to have an overdraft limit of $20,000 to provide money for the occasional big expense, but usually you won’t use more than $5000 of that credit limit on average. So in this case $5,000 is the level of ongoing funding you need.
When applying for an overdraft limit, things to watch out for are:
- higher the overdraft amount higher the fees
- clauses where the lender can demand repayment of the whole loan at any time.
Fixed or variable interest rate
The choice of rate will affect the stability of repayments, overall cost of the loan and the loan features available. With a fixed rate loan the lender bears the risk of interest rate moves, while with a variable rate you will bear this risk. Ultimately, the choice of variable or fixed rates will depend upon how much free cash flow your business generates after you have paid all your expenses, including loan repayments. If your business has a low profit level, a variable rate loan repayment may rise beyond your ability to pay.
Loans can be secured or unsecured by various types of assets, including residential, commercial, rural property or business assets. Alternatively, some loans are unsecured by any asset. Generally the less you provide for security the higher the interest rate will be. Be aware the lender has the legal right to seize any property or asset you offer as security if you can’t repay a loan on time.
There can be fees which can make a loan less attractive than it first seems. These include one-off fees such as establishment/application fees, exit/discharge fees and early termination fees or regular fees such as service fees or line/credit advance fees. The Business Loan Finder tool includes the cost of set-up and ongoing fees in the average monthly repayment to give you a better idea of the true cost of the loan.
The information provided here will provide you with a range of possible finance options. It is important to seek advice from your accountant or business advisers before approaching a lender for a loan.
Tip: Use our below Cashflow forecasting template to plan your cash flow and work out how much you need to lend.
Plan the business, plan the finance
Lenders will ask for a lot of in-depth information about the financial history of the business. It’s also important for you to create a convincing and detailed business plan which should include a profit and loss budget and cash flow forecast. The information you use to build your business plan may also be needed by the lender to assess your project. This includes both the past and future plans for your business, the people working in it and the market itself.
The outcome of your application is strongly influenced by how well your proposal is researched and how well it is presented.
Banks and other lenders will look at your business’s risk profile when considering your loan application. Understanding what lenders look for and what they consider risky will help you present your business in a favourable manner.
As a general rule, lenders look for:
- the level and nature of your security (what you’re offering to give them if you can’t repay the loan)
- your ability to make regular loan repayments (cash flow risk)
- your ability to ultimately repay the debt (business risk), including any other debts you might already have.
You need to be able to assess the level of cash flow or business risk in your specific circumstances. A projection of the cash requirements of the business is most important to a lender, as it is the actual cash left after expenses that will repay the loan, not income. It also shows you are an effective manager.
A lender’s perception of risk
The following factors can influence your lender’s perception of risk. If a number of these areas apply to you and your business you may need to consider another source of finance.
- start up businesses incorporate financial, business and management risk
- lack of security
- lack of business history
- industry sector, factors will include levels of competition, barriers to entry, profitability profile and current economic conditions
- highly seasonal businesses, for example swimwear and agriculture. You’ll need to demonstrate how you’ll deal with cash flow pressures in the off season
- lack of planning, market knowledge and finance skills
- poor credit history.
Watch out! Before entering into a payment arrangement with the Tax Office, businesses should discuss this with their current or future lenders. Many businesses are unaware that entering into a payment arrangement with the Tax Office or other government agencies may adversely affect their current and future financing arrangements. For instance, a lender may not lend to a business if it is currently in a payment arrangement.
For more details visit the Guide to managing your tax debt on the ATO website.
How to Get a Small Business Loan (with Pictures), getting a small business loan.#Getting #a #small #business #loan
How to Get a Small Business Loan
Whether you’re planning to expand an existing business or just now getting one off the ground, a small business loan can give you the financial support you need. Not all businesses can get a small business loan, so you need to take special care when applying for one. Make sure your credit history is as strong as possible, and search for lenders. Lenders will want to see numerous financial documents, so gather them ahead of time. Although getting a small business loan takes a lot of work, it is possible.
Part One of Four:
Improving Your Credit Profile Edit
Part Two of Four:
Identifying Loans and Potential Lenders Edit
6 Factors That Keep You from Getting a Small Business Loan, getting a business loan.#Getting #a #business #loan
6 Factors That Keep You from Getting a Small Business Loan
For many entrepreneurs, a small business loan is an essential way to finance a new business or expand existing operations. However, obtaining funding for your business is no easy task. Here are six barriers that can prevent you from getting the small business loan you need and a few tips on how to avoid these roadblocks.
1. Poor credit history
Credit reports are one tool lenders use to determine a borrower s credibility. If your credit report shows a lack of past diligence in paying back debts, you might be rejected when applying for a loan.
Paul Steck, former president and CEO of the international franchise restaurant Saladworks, has worked with hundreds of small business franchisees, many of whom have bad personal credit as a result of illness, divorce or other extenuating circumstances.
Sometimes, very good people, for reasons beyond their control, have credit issues, Steck said. And, unfortunately, that s a real barrier to entry in the world of small business.
People with bad credit should consider nontraditional financing options which tend to place less emphasis on credit scores before giving up on getting a loan.
Editor s Note: Looking for information on business loans? Fill in the questionnaire below, and you will be contacted by alternative lenders ready to discuss your loan needs.
2. Limited cash flow
Cash flow a measure of how much cash you have on hand to pay back a loan is usually the first thing lenders look at when gauging the health of your business. Insufficient cash flow is a flaw that most lenders can t afford to overlook. Therefore, it s the first thing business owners should consider when determining if they can afford a loan.
Really thinking through that cash-flow equation is like preventative medicine for your business, said Jay DesMarteau, head of regional commercial specialty segments for TD Bank. You can either wait until [your business] gets sick, or you can do things to prevent it from getting sick.
One of the preventative measures DesMarteau recommends is to calculate cash flow at least quarterly. If business owners take that step, they may be able to optimize their cash flow before approaching potential lenders.
3. Lacking a plan for the future
Having a plan and sticking to it is much more attractive than spontaneity in the finance world.
Banks require that business owners have an organized, detailed and quantitative business plan in order to move forward with the loan process, said David Goldin, CEO, president and founder of Capify, an alternative small business lender.
However, Goldin noted that it s common for very small businesses to not have a formal business plan or any plan at all, for that matter. In these situations, he recommends that business owners at least forecast their future earnings before applying for a loan, so lenders will have an idea of your profitability.
You should also be prepared to explain your plan for the money you want to borrow.
Lenders . biggest single complaint is that small business owners aren t able to articulate very well how they re going to use the capital that they re looking for, how they re going to make repayment and what impact they think [the loan] is going to have, said Ty Kiisel, who writes about small business for online lender OnDeck.
According to Kiisel, your pitch to lenders doesn t need to be eloquent, but it must be straightforward. At the bare minimum, loan applicants should be prepared to explain why the want a loan and how they plan to repay it.
When it comes to approaching potential lenders, business owners should have their act together. That means having all the paperwork you ll need for your loan application on hand.
One of the things that can be a problem when applying for a loan is if [business owners] don t have the documentation that the bank will require [such as] back tax returns, Steck said.
There are plenty of resources that business owners can refer to when putting together their loan applications. The Small Business Administration, for example, provides a highly detailed loan application checklist for borrowers. Using these resources can decrease your likelihood of coming across as disorganized or unprepared. [See Related Story: Applying for a Small Business Loan? Here s What You ll Need]
5. Failing to seek expert advice
When it comes to making financial decisions for your business, lenders want to see that you ve sought guidance from knowledgeable advisers.
Accountants can be an important source of advice for small business owners. That s why Bizfi has partnered with the National Directory of Certified Public Accountants, says Stephen Sheinbaum, CEO of alternative lender Bizfi. But there are many other places to find good people to talk to, such as the Service Corps of Retired Executives (SCORE), a free mentoring service that is supported by the Small Business Administration.
According to Sheinbaum, SCORE connects you with retired businesspeople with experience in your market.
This is important because they will know about the kind of capital that is most important to people within your industry, said Sheinbaum.
He also recommends that business owners get financial advice from business networking groups and conduct research on the websites of the leading alternative funders, since many have detailed resource sections for small businesses about the many kinds of available capital and the best ways to prepare for funding.
Too many business owners approach lenders with an apathetic attitude, Steck said. In other words, they simply don t demonstrate why they, rather than someone else, are a good candidate for a loan.
You have to exude a passion, said Steck. I m going to do this, and I m going to be the best in the whole wide world. You have to go into it with that sort of mentality, and a lot of [potential borrowers] don t do that.
Editor s Note: Looking for information on business loans? Fill in the questionnaire below, and you will be contacted by alternative lenders ready to discuss your loan needs.
Additional reporting by Elizabeth Peterson. Some source interviews were conducted for a previous version of this article.
Paula is a New Jersey-based writer with a Bachelor s degree in English and a Master s degree in Education. She spent nearly a decade working in education, primarily as the director of a college s service-learning and community outreach center. Her prior experience includes stints in corporate communications, publishing, and public relations for non-profits. Reach her by email.
Small-Business Loans – 3 ways to get a loan, getting a small business loan.#Getting #a #small #business #loan
3 ways to get a small-business loan
The recovering economic environment has meant that small businesses have had to be more creative when looking for loans.
However, companies with sound business strategies still can borrow. Options include loans from traditional banks and institutions affiliated with the Small Business Administration, as well as financing from Internet-based lenders.
“For creditworthy, high-scoring small businesses, there is money available,” says George Cloutier, CEO of American Management Services, a consultant to small businesses.
The best place to get a small-business loan is still a bank, says Cloutier. Banks typically offer the lowest interest rates and many have established reputations as trustworthy lenders.
“Many small businesses try three or four banks and then stop looking,” Cloutier says. A more persistent approach has better odds of success.
Calculate business loan payment
Want to calculate your small-business loan payment? Go to Bankrate’s loan and amortization calculator.
“Take out the phone book, target 10 banks and work through that list,” he says.
That strategy worked for Michael McKean. He is founder of The Knowland Group, a company that helps hotels fill up their meeting space.
A few years ago, as the success of The Knowland Group grew, McKean began searching for a bank that would give the growing company expanded access to credit.
“We talked to every bank in our area, at least a dozen,” McKean says. “Many came back with proposals, but the terms were very onerous. Or sometimes they shifted terms.”
Finally, M T Bank came through.
“They just wanted to get our business,” McKean says.
McKean says his company did not approach M T any differently than it had approached the other banks. It was just a matter of being persistent until the right deal came along, he says.
“We did everything right, approaching the right person at each bank,” he says. “We’re a profitable business. I think it was just the … credit crunch that prevented us from getting a loan.”
Cloutier says the key to success with banks is to show past profitability, and to describe a well thought-out plan for future profits.
“If you aren’t making a profit now, you must be able to tell the bank how you will change that in the short term, or you really won’t be able to get a loan,” he says.
He also recommends that businesses start small in their loan requests.
“If you need money for four trucks, ask for two,” Cloutier says. “The bigger the loan request, the harder it is to get it approved.”
Another way to find a bank loan is through the Small Business Administration, or SBA. The SBA can direct you to banks that offer loans guaranteed by the agency. This way, you’ll have the advantage of approaching banks specifically interested in lending to small businesses.
Interested businesses should contact the SBA office nearest to them, which can be found on the agency’s website. Jeanne Hulit, the SBA’s acting administrator, urges businesses to seek a bank that is an experienced SBA lender.
Banks granting SBA loans place increased emphasis on business plans, cash flow and profit forecasts in deciding whether to lend, she says. The SBA also can refer businesses to free counseling centers to improve their performance.
Another source for loans is the Internet. There are several sites where businesses can seek alternative lenders, such as individuals and small companies.
Interest rates are generally a little higher than what a bank will charge, but it’s much less than what you’ll have to pay on many credit cards.
Look around at different sites, some may charge a one-time fee to list your business, while others are free to list but might have fees reflected in loan rates.
If you’re going to list your company on one of these sites, describe your business in clear and concise language.
Lastly, make sure to investigate the company you are looking to post your business on. These kinds of companies were successful in 2008 and during the recession, but times have changed. Many have since gone out of business. Before paying for anything, make sure the company is legit.
Getting A Small Business Loan – Need Small Loan Bad Credit, getting a business loan.#Getting #a #business #loan
getting a business loan
Learn How to Get a Business Loan from Banks and Others, getting a business loan.#Getting #a #business #loan
Learn How to Get a Business Loan
Personal loans are widely available, but if you’re trying to borrow for a small business, you’ll find that the process is more difficult. If you’re thinking of borrowing to start or grow your business, get started and get organized long before you fill out an application. Lenders want to be sure that they’ll get repaid, which means they’re looking for several criteria:
- The loan makes good business sense
- You personally (or your business) have a strong credit history
- The people managing the business are qualified to put the money to good use
- The bank is able to manage their own risk
Good Business Sense
Lenders only want to make a loan that helps you grow your business. You might be confident that the money will help, but you need to convince them of that fact. To do so, create an airtight case that proves (without exaggerating) how the funds will lead to greater profits – and revenue you can use to repay the loan.
Your business plan is essential to get approved for a loan. If you don’t have one yet, it’s time to create one. You need to show, with specific numbers, how you’ll earn money, how you’ll spend it, and your big-picture strategy. Explain who all of the players are in your business, especially management, marketing, and sales roles – those individuals will bring in new business that helps pay for the loan.
It’s okay if you do all of those jobs – just explain why that is and your track record of success in those areas. Your business plan should also include basic financial statements, pro-forma statements, and information about your personal resources.
Building the Foundation
Here’s the frustrating fact about most small business loans: your personal finances are important.
Banks want to see a history of successful borrowing anytime they make a loan. That includes loans for your business. Unfortunately, many businesses don’t have any history of borrowing (especially new businesses), so lenders look at your personal credit scores instead. If you’ve got good credit, that’s a good sign that you’ll handle the business loans well. If you’ve got bad credit, lenders will be more skittish about lending. If your credit is “thin” because you haven’t borrowed much in the past (or if it’s in need of some repair), you may need to build your credit before lenders are likely to approve you for a loan.
You’re applying for a business loan, and you may even be organized as a corporation or LLC. However, lenders will almost always want to hold you personally responsible for the loan. If they don’t do that and the business fails, there’s nobody left to repay them. But if you make a personal guarantee on the loan (which is likely a requirement), they can go after you personally, and your personal credit will suffer if you don’t repay.
If you a have collateral to pledge for the loan, you’re more likely to get approved. With some businesses, you might be able to pledge business assets like vehicles and equipment (if your business has those types of assets).
It’s more likely that you’ll have to pledge personal property such as your home or your financial accounts.
Where to Borrow
Once you’re organized and you know what to expect, it’s time to start talking with lenders. You have several options for borrowing, and each option comes with pros and cons. For best results, talk with lenders to understand their requirements and how they work – don’t just fill out an application and hope for a “yes.”
Banks and credit unions are traditional sources for small business loans, and they’re a good place to start. Especially with small institutions, you’ll be able to meet with a lender who can guide you through the process. Larger banks might take a more hands-off approach. To improve your chances of getting approved, ask about SBA loans, which reduce the bank’s risk and feature interest rate caps.
The loan process at banks and credit unions can be slow, so be prepared for a long process with a thorough review from the bank.
Online business lenders are a relatively new option, and they might provide more choice than you can find locally. You might also find it easier to get approved – these lenders are more interested in funding loans and growing than conservative banks and credit unions. Online lenders might also move faster than traditional lenders. That said, they’re not looking to lose money, so the loan still needs to make sense.
Microlenders might be willing to help if you meet certain criteria. Especially if you’re investing in communities that microlenders are interested in or you have a low income, these lenders might approve loans that banks will not.
Online personal loans are an option when nobody will approve you for a business loan. Ideally, you’ll borrow in the name of your business – it’s cleaner and more professional that way. But some small business owners can only get personal loans. Try marketplace lenders and peer to peer lenders, which tend to offer competitive rates and quick turnaround on applications.
Small Business Financing, TD Canada Trust, getting a small business loan.#Getting #a #small #business #loan
Small Business Financing
7:00 a.m. – 12:00 a.m. EST
Helping you start, purchase or grow your business
How to apply
Visit your local
TD Canada Trust branch
Government Grants for Small Business
With a Canada Small Business Financing Act Loan (CSBFL), TD Canada Trust and the Government of Canada work together to help you with the financing of your existing business or start-up. A CSBFL can help you get the loan you need to expand, purchase, or improve the fixed assets within your business.
Features of the CSBFL include:
- Loan amounts available up to $1,000,000 1
- Financing available for up to 90% of the “Eligible Costs” 2 of assets financed
- Monthly repayment frequency with a choice of terms, up to a maximum of 10 years. A repayment schedule reflecting an amortization of up to 20 years may be available 3
- Competitive fixed and floating interest rates are available
- Personal guarantee required, starting at 25% of the loan amount 4
- Loan may only be used for certain purposes
- One-time Federal Government registration fee of 2% of the loan amount (which may be included in the amount borrowed)
- A 1.25% Administration Fee is included as part of your interest rate
- Standard TD Canada Trust Set-up fees apply
Do you qualify?
Here are some of the government’s requirements 5 for a CSBFL:
- Your business operates or is about to operate in Canada
- Your business’s annual gross revenue is less than $10 million in the year you apply
- Your business is for profit, and is not a farm, charity, or religious enterprise
- The assets purchased or improved must be used in your business