Small Business Administration (SBA) guarantees are meant for securing small business loans. It is very difficult to secure small business loans without these provisions. Banks normally find it a risky venture to grant a loan for ‘starting’ small businesses. The reason is most business fail within first 3-5 years of time span.
Preparation is Mandatory
Having a business plan is almost a must for start-up businesses and entrepreneurs. Your personal information contains detail about trade lines and credit score should be around 700. An income and expense personal budget supported by bank statements, tax returns, and accounting of all assets and debts should be filed. This can include stocks, savings, retirement accounts and money market accounts properly organized and presented to a lender. Business plan describing long-term business goals, product and market niche, market analysis and projected financial statements should be submitted.
Small Business Loan Source
Accion U.S.A. is a source of non-SBA loans. It grants loans for working capital, inventory, supplies and equipment. A start-up business can receive up-to $30,000 in 2011 and the loan repaying period is kept at 60 months at interest rates ranging between 9 to 16 percent. This non banking organization is offering special loans for green businesses that manufacture green products or are involved in energy efficiency.
Starting Small Business with Micro Loans
The American Microloan offers small cash advances to businesses for purchase of inventory and meeting working capital needs. Such advances are provided through credit cards. It is through local non profit micro financial intermediaries that small loans are forwarded to businesses. These organizations normally find funding from US SBA but operate independently from government funding source. Loans averaging $13,000 in 2011 can be applied for from local micro lenders. Such loans normally have interest rate varying from 8 and 13 percent and a repayment term of six years.
Financial Institutions Supporting the Cause of Community Development
Nonprofit lenders can receive funding from the U.S. Treasury. Local Community Development Financial Institutions can offer microloans to small rural business and to individuals with low income and businesses placed in distressed communities. Such micro-lenders’ mission is to assist all such small businesses that work for job creation and contribute to economic development of a local community.
This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to