Where Can You Get A Small Business Loan

By: Court Tuttle

Okay, you have the ideas, the desire and the plan. At this point it all seems very clear to you and all you need is the money so you can more forward. Are you prepared to present your plans and documentation to banks and financial establishments?

In order to prove that you're worth the money, you'll want to prove yourself. First your personal credit history is relevant to your small business loan, especially if your business does not have a long operating history.

They will assume that you operate your business in the same manner that you manage your personal finances. You need to show your business's financial health. They want to know how much it's worth and how much money you're moving.

If you are serious, then you'll also want to prepare detailed questionnaire statements. These give projections about what your business will be worth going forward. Banks award small business loans to those that have everything spelled out and planned.

Have a plan with as much detail including bios of you and your partners, your track record, your strategies and advantages. Then begin thinking as to what institution to do business with. It's best to start with ones you already work with.

These places know your history and financial behavior. If you choose not to, then go to somebody who is actively looking to work with people desiring small business loans. Another choice is to ask at credit unions because of their small size you can talk directly with higher-level decision makers.

If you are still unable to obtain a loan through any financial institution there is still another area to look into. The next best idea, and in some ways, a great idea is a home equity loan. It all depends on how much equity you have in your home.

If your residence has around 20 percent equity and 80 percent loan outstanding on its value, then this strategy should not be considered under any circumstances. On the other hand, if you are a longer-time homeowner with more than 50 percent of your home's value as equity, this could work for you.

The following example will shed some light on this. Consider a home valued at $200,000 with $80,000 in total debt outstanding and $120,000 in equity. Borrow $50,000 at 7 percent interest and monthly payments are $300 for $3,500 in annual interest due.

The business will be able to show pre-tax profits of around 5,000 per month and can easily cover the $300 interest. Each month pay the $300 deductible business interest and an additional $2,000 in principal reduction.

At this pace, the entire loan could be paid back in about two years. There are several different ways to try to obtain your needed loan. The only way to know for sure is to give each one a try with all that you have.

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