Small businesses are the engine of our economy. When marketing and purchasing equipment is hard without sufficient funds Small business owners consider business loans. The lending process for the small business owners is very frustrating and complicated getting a loan. Lenders are into making money and it would be difficult to get funding for a business and most often the small business owners are shut out from getting business loans.
Benefits of small business loans
In comparison to any other type of loans business loan is provided at lower cost. The small business loan helps buy the essentials in the business like equipment and also marketing.Sometimes some of the taxes imposed on the small businesses can be waived if the business owners are committed to paying the loan. Various loan plans are available for entrepreneurs.
The most common funding types for startup businesses are equity funding,bootstrap, and debt funding.
Equity funding: It is a means of financing your company in which in exchange for shares of your business stock you receive money. Raising equity capital can be done in multiple ways. Equity rounds include Seed financing which is a small amount of capital a business needs to get started.This small capital cover expenses until they start earning revenue. Seed money can be a wonderful tool for the attract money from future investors. Usually, seed capital is smaller and comes from friends and family or from angel investors.
Boot strap: Sometimes the best funding option is to cut corners whenever possible without seeking outside funding and building your business from personal savings.
Without outside interference, boot strapping helps you focus on execution and helps in yielding larger profit margin.
Debt funding: Another viable funding option is the debt funding where you can borrow cash you will have to payback regardless of whether or not your business is making money.
There are various types of debt funding loans available Venture debt, Asset loan, AR line,and SBA loan.
Criteria a business should consider for securing a business loan:For securing a small business loan many documents are mandatory across lenders.
Loan application forms: Both smaller and biggest banks have invested in technology which allows small business application online. In order to get funding, some banks might require the borrower to come to their bank and fill out the application form.
Lenders expect the borrower to provide personal background information which includes aliases, criminal records, and current and previous addresses.
The small business owner should have a business plan where the business owner can give a detail explanation of what his business is and where he plans on taking his business in future.