Business Ideas | Small Business Ideas: Small Business Loans

Small Business Loans

Small Business Loans

Small business entrepreneurs often look at bank loans to start up a new business as they offer less risk than using their own money or having to sell off assets such as a home. As long as you have a solid business plan and a good reputation, you eventually will find a lending institution to provide you with start-up capital. If a private bank won't offer you money, alternative sources of financing exist.

Finding a Loan

You do not have to focus your search for a small business start-up loan only on banks. Several large companies are now in the business of lending. According to Mike Tracy of Business.com, General Electric lends about $10 billion each year to entrepreneurs. You might even forgo a loan entirely if you qualify for a small business grant from the Small Business Administration (SBA).

Applying for a Loan

Small Business Loans

To qualify for a start-up loan, the bank wants to know everything possible about your personal history and your potential business, the SBA explains. A typical loan application asks for basic information about your business, such as the structure of the company, why you need a loan instead of personal finances and how you plan to use your capital. In addition, you should show an excellent credit score, business experience, collateral and any licenses required to run a business in your area to prove you are responsible.

Considerations

In general, banks are more cautious with their money--especially when dealing with new business owners--than private investors or investment firms because banks have to keep in mind that they are lending money that belongs to their account holders, notes D&B Small Business Solutions. In addition, banks are more likely to give out small loans (less than $200,000) than fund large ventures.

Credit Crisis

The 2008 credit crisis has made it more difficult for small businesses to get a start-up loan than in previous years, according to Lydia Dishman of Entrepreneur.com. In 2009, for example, the U.S. Small Business Administration reduced its lending to small businesses by 36 percent over the previous year. This means entrepreneurs must put more effort into laying out a profitable business plan and looking for funding to ensure they get start-up capital.

Tip

You can improve your chances at receiving a small business loan by increasing the stake you have in your new venture, according to the SBA. This means increasing the collateral you put up for the loan and decreasing your debt obligations. Entrepreneur.com recommends that investors create an honest business plan. Investors are aware of the inflated numbers loan-seekers usually give them. Thus, you should give investors a sensible expected return rather than a far-fetched scenario for your future company.

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U.S. Small Business Administration: Finance Start-Up

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Small Business Loans

Small Business Loans

2 comments:

UnknownJune 3, 2013 at 10:49 AM
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UnknownJune 3, 2013 at 11:03 AM
Small business visionaries much of the time look at bank developments to start up an additional business as they offer less risk than using their own particular specific money or expecting to close out stakes, for instance a home.to meet all prerequisites for a start up development, the bank ought to know everything possible about your single history and your potential business, the SBA delineates.
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Easy Tips and Ideas to Start Business

Although anyone can start a business, many people fail because of a bad product or improper research. If you want to start your own business, you can improve your chances for success before you even begin. In order to make your business successful, start strong and make sure that your idea will hold out for the long haul.

Have a Good Product

Ensure that you plan to sell something useful. Although you may think that your product is important or special, that doesn't mean the general public will agree. Ask friends, family and strangers what they think of your product. If they don't seem that interested, ask them why. With their suggestions, you can either improve the product or scrap the idea completely. According to Brad Sugars of Entrepreneur magazine, most small businesses fail because they sold a product that didn't have an adequate market. This also applies to small businesses that provide a service. A lawn-care business might be useful for part of the year in a northern state, but it is in-demand year-round in the south. Consider whether people will actually want to use your service and get constructive advice from those not afraid to give their opinion.

Research Local Businesses

Research local companies before starting up your own business. This will not only give you an idea of the amount of competition you will have, but it will also help you price your product or service. If you're looking to start a wedding photography business, you may find during your research that the market is over-saturated in your area. If not over-saturated, you should contact each business and ask them for a price list. Alter your prices so you can stay competitive with the competition in town. Researching similar local businesses will also help you decide where to locate your business location. Try not to start up a store or office close to another business of your type. If your small business is located away from similar business types, this will cause locals to choose you over businesses that are farther away from where they live.

Get Professional Advice

You may know someone who has started their own successful business. Ask him for advice and listen to his stories of how he started his company. You may gain useful advice on the good and bad ways to start a business. Local entrepreneurs can also introduce you to local product providers or advertisers that you may not have met without their help. Accept any advice with open arms, especially if the advice is coming from someone successful in the area.

How to Calculate Business Start Up Costs

Starting a business in no easy endeavor. It takes a great deal of research, perseverance and hard work. While sweat equity will make your small business more successful, you will most likely need real capital to get the business started. Before you start raising capital and/or investing your own funds, the first thing you need to do is determine the total start-up costs.

Step 1

Determine your costs of sales. For most small businesses this means inventory, the cost of raw materials, manufacturing equipment, shipping, packaging, and warehousing. However, not all businesses sell products. In this case, the cost of sales is primarily the direct labor involved in making the sale. For example, to open a small shoe business entails purchasing enough inventory ($10,000) to stock the store.

Step 2

Determine professional fees. Planning your business structure, i.e., limited liability corporation or general partnership, means hiring an attorney. There may also be the need to pay an attorney for help with establishing trademarks, copyrights, and patents. In this scenario, that puts total professional fees at an estimated $20,000.

Step 3

Determine technology costs. Technology can greatly reduce the cost of labor for small business if used effectively. Most small businesses require computers, printers, cell phones, website development, Internet access, software applications, information security, data storage, and outsourced information technology (IT) consulting. If the cost of technology is $10,000 to start, add an additional $5,000 a year for maintenance (hint: maintenance is not included in start-up costs).

Step 4

Determine administrative costs. This varies with business types and may include items such as business insurance, office supplies, product packaging, parking, rent, express shipping, desks, chairs, fax machines, phones, or anything else necessary to operate the business daily. A good estimate for start-up administrative costs would be $5,000 for the first six months.

Step 5

Determine initial sales and marketing costs. Now that you have your product, you need to let folks know about it. Sales and marketing costs generally include marketing materials for presentations, printing stationery, business cards, advertising, trade show events, and public relations. These initial sales and marketing costs can add up to $3,000.

Step 6

Determine the wages and benefits needed to secure a staff. This includes employee salaries, benefits, workers compensation, and payroll taxes. Let's put the cost of wages and benefits estimated at $20,000 for the first three months of business.

Step 7

Add all costs associated with starting the business for a total. Be sure to only include business start-up costs that will be incurred in the first three to six months of operations. For this example, the calculation is: $10,000 + $20,000 + $10,000 + $5,000 + $3,000 + $20,000 = $68,000.