Business Loan Guide and Reviews:

Business loans, especially for small businesses, are crucial to the start of any company but they are crucial to the overall survivial of the business as well. The vast majority of small businesses fail within the first 3 years and often it's because of a lack of funding that could have kept the business afloat a while longer to establish their products and services. Business loans are readily available, but you want to make sure you find the right loan for you and your company. Perhaps you are looking to open a new restaurant, buy new equipment, get a commercial mortgage, or just need more working capital. With all the details involved in opening a new business, the last thing you need is to have trouble getting the proper financing. Making money is why you want to be in business and once the financial aspect of starting a business has been dealt with the real work can begin.

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We recommend and so do many other agencies that you are start at SBA.Gov, the United States small business administration website that will help guide you through the process of starting or buying a business. They have a "small business planner" section with information on finance start up, buyings a business, buying a franchise, licenses and permits, etc. The SBA advises you to get a working business plan on paper before you approach any lending institution about a loan. Have all your personal finances in order as well in case you plan on using equity from a house or similar items to secure your loan. The SBA assists small businesses with a wide range of loan programs, but keep in mind that the SBA is only a guarantor of loans made by private and other institutions and they don't actually loan you the money themselves. It's a great place to start if you have never been a business owner before because they know the ins and outs of starting a new business and acquiring the necessary funding to not only open it but keep it running properly. The SBA is excellent at determining your loan eligibility with you and also working with minorities and women to secure small business loans. One other area of the SBA that so many small businesses turn to in a time of crisis is their ability to help with disaster and recovery assistance after natural disasters like hurricanes, tornadoes, wind storms, and earthquakes that damage your business. Down below we have tried to provide information on the various types of loans that you may come across and the options associated with each type.

Small Business Loans:

Small business loans are great for purchasing real estate where the business will operate from, buying furniture, fixtures, equipment or machinery, for construction, renovation, and improvements, or for inventory and working capital. The one thing to remember is that banks normally make loans only to businesses that have a proven operating history. Therefore, your primary source of funds for starting a business should be your personal savings. Of course, as we mentioned above, the SBA loan guarantee programs will help get a relationship started between you and your bank. Make sure your credit rating is in good shape and that your FICO score is above 680. With a solid business plan, some of your own capital in the business, and a good credit score, you should be able to acquire an SBA loan or government small business loan. These types of loans have 2 key features - you can request as much capital as you want (no limit) and the SBA loans 7(a) have a maximum maturity term of 25 years. There is no guarantee a bank will loan you all the capital you want, but there's always negotiation involved with business loans. In online forums for small business startup costs and ideas, we found many people who turned towards family and friends as a source of initial funding. Other forms of small business loans came from credit cards and 2nd mortgages. There is always a risk associated with any business, and small businesses have a high failure rate which makes them the riskiest of all.

Unsecured versus Secured Business Loans:

What type of loan are you looking to get - secured or unsecured? An unsecured business loan means there is on collateral granted for the loan like the assets of your business or your personal assets (sometimes both). Unsecured loans are those that are from credit cards, friends or relatives, and unsecured lines of credit. A secured loan is one where assets are put up to secure the payment if something should happen and you are not able to pay the loan in a timely manner. Secured loans include assets like home mortgages, car loan or lease and an SBA loan. The collateral you put forward will ultimately determine how much a lender will lend against your assets.

Venture Capitalists:

Perhaps you are a small business running out of your house or garage and want to expand your ideas and products on a much fuller scale. Equity investments from venture capital firms are always a viable option if your company has the potential to do more than $25 million in gross revenue yearly, if there is large national/international market potential, and if the management team has had a successful history. Seed, or startup funding is usually given in the earliest stages of a business often those with zero history. The investment from the venture capitalists is solely based on your business plan, the management group, and the market projections. Venture capitalists hear dozens of new ideas each day and only back ideas or businesses that they have a good feeling on. Many small businesses has stayed away from venture capital firms in recent years (after the Internet bust of 2001) since they think they can get a better equity stake through other sources. Venture capital firms don't loan the money and expect repayment on the debt, they take an equity stake in the overall valuation of the company and hope to have it acquired one day or have it go public where they cash out for many times more than their initial investment. The one advantage of equity from a VC firm is that they have plenty of money to loan (millions) which should give the business plan enough time to get of the ground plus the contacts that VC companies have can really help a business get started properly. Some of the more well known venture capital firms are Kleiner Perkins Caufield & Byers, Sequoia Capital, Bessemer Venture Partners, and U.S. Venture Partners.

Bad Credit Small Business Loans:

Although having bad credit will definitely alter your business loan route, there is still a chance at getting a loan even with terrible personal credit scores or histories. Financial advisors say the first thing to do is separate your personal credit from your business credit. Your business credit score will have no connection to your social security number leaving you with a good chance at acquiring funds to start a business. Get a tax ID and a legal entity for your business and start building your business's credit. If your business credit score is good enough, suppliers and vendors may allow you to open small credit lines with them which in turn can be leveraged into larger business loans. You can check your business credit history at Experian, Equifax and Dun &Bradstreet. It's not easy getting business loans with a shaky credit history, so start slow and be patient.

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