A small business is usually defined as a company that employs less than one hundred people. It also can be a sole proprietorship, a partnership, or a privately owned corporation. Small businesses enhance economic growth and employment rates. The most common types of these businesses are restaurants, salons, photography studios, and small retail stores. Some businesses, known as “mom and pop” stores, are companies owned by a family and generally only hire other family members.
Small business owners face a variety of challenges: difficulty obtaining start-up funds, competition with big businesses, insurance costs, and taxes. However, there are some agencies that aim to help these businesses thrive and contribute to the economy. The Small Business Administration offers a variety of loans to help start-up and existing businesses. The Better Business Bureau offers Small Business Certification. Certification ensures a business’s products and can make potential customers feel safer about conducting business with a new company.
The first source for many of these business owners is usually the Small Business Administration. However, there are many other funding opportunities available as well. The most common types of funding are through personal equity loans, private investors, venture capital, partnerships, and bank loans. When business owners have difficulties obtaining these types of funding, they may also look to factoring out their accounts receivables, subordinate debt, and loans against a life insurance policy or a 401(k) plan.
Apply small business loan generally refers to the process by which a business owner applies for funding provided by a financial institution. The most common small business loan is the 7(a) loan, which is provided by the Small Business Administration (SBA). Many other financial institutions use the SBA’s loan requirements as guidelines for their own loan requirements.
In order to apply for this type of loan from the SBA, a business must employ fewer than one hundred employees and must have been denied loans from traditional lenders. Applicants must supply personal and business financial documentation as well as a business plan. The SBA also looks at several other factors when considering an application for approval. Though the following may not be required, they can help a business be approved more quickly: good personal credit, payment of personal and business taxes, ability to repay the loan, total collateral, effective management and total debt. The more profitable or promising the business, the more likely it will be able to secure funding from the SBA.
The next step needed to apply for a small business loan is to take all necessary documents to a participating SBA guaranty lender and ask for financing. To find out if a particular lender participates in the SBA loan program, either call them or go to the SBA’s website online. From there, the lender will be able to assist businesses in the loan process and determine the loan terms and interest rates.