Expanding Small Business Financing Opportunities For Your Business

Small business financing is often the only way for some businesses to get the capital they need to open their doors, expand operations, or develop new services and products. However, the Great Recession created some significant hurdles for personal and business loan applicants who boasted less-than-perfect credit scores.

However, recent investigations suggest that banks are starting to open their doors to business owners in greater numbers. Although credit requirements remain above what they were before the recession, lending has indeed warmed up for many business owners. Where many businesses were just “treading water,” they’ve now entered an era of cautious and optimistic growth.

Another positive sign in small business financing is the improved cash flow in the nation’s major banks, which has led to increased lending activity and an overall reduction in average commercial loan rates. With the recession fading into the background of the economy, small businesses that have been waiting for an improved economy are finding that banks are willing to deal with businesses that might have had budget shortfalls a few years ago. Small businesses and fledgling companies that have been conservative in hiring and expansion efforts post-recession have finally become eligible for loans.

According to data compiled by the federal government, one of the major sources of small business financing today has been loans through the Small Business Administration (SBA). One of the reasons why looking at banks that provide loans that are guaranteed by the SBA is a savvy way of obtaining a business loan is because the government’s list of banks represents lenders who are already interested in making loans to small entities. Looking at these banks reduces the time a business owner might need to spend to find commercial lending opportunities. It’s also a good idea to locate a bank with loan officers who have prior experience with SBA loans.

However, getting business and commercial loans still requires a solid application. In small business financing, one of the most powerful features of a loan application is the business plan. Banks are much less likely to hand over a check if the business plan isn’t fleshed out, accurate, and professionally written. A business plan with typos or a lack of information on cash flow, budget, and fiscal projections won’t impress a loan officer. Some small business experts advocate hiring a business plan writer to ensure the final document is as professional as it can be when it’s sent to the bank.

The government has taken an interesting step in encouraging growth of small business by reducing the fees associated with SBA loans. Borrowers already enjoy SBA loan rates that tend to sit below traditional loan rates, but low fees on certain SBA loans may make these small business financing methods even more cost-effective than they were in the past. For example, loans under $150,000 no longer have fees and short-term loans guaranteed by the SBA also feature rates lower than many standard bank loans. This means that brand new start-ups or businesses that are nothing more than an idea in a garage are possible for new borrowers.

Small business loan applicants should remember that the interest rates on SBA loans aren’t set by the government, but are part of a negotiation between the bank and the applicant. However, there are maximum rates set in place so the interest on business and commercial loans will never exceed a certain amount. Since the bank has some leeway in setting an interest rate, it’s worth it for a small business owner to come to the table with a credit rating that’s as high as possible. Small business financing today isn’t a cakewalk, but getting a loan as a brand new business is possible in today’s lending environment.

The Truth For Couples Who Are Funding A Home Based Business

Okay, it’s time for couples to hear the truth in regards to funding a home based business. Funding is an important topic but the truth is if you are a couple in business or a couple just starting a business, it is tough to get funding from anyone. This is because couple entrepreneurs are a very high risk investment.

For a couple who want to start a business, it matters very little how good their credit score is, funding is still difficult. The reason is because the success rate of couple-run businesses is low.

Some 98% of couple-run businesses fail within the first 3 years and because most couples don’t know how to protect themselves they lose everything. Then the couple usually ends up in divorce court. The lender most likely will not get paid back, as the business usually has gone bankrupt.

This makes lending to couple entrepreneurs who are starting a business, high risk and many investors steer clear of investing in high risk ventures with a 98% failure rate.

Thus if you want funding to begin a home based business, you are going to have to get creative. Of course there is crowd funding, but more importantly it is important to understand, that according to the SBA most home based businesses don’t need more than a few thousand dollars to start.

In fact, the average home based business can startup for as little as $500.00. That means most couples need startup capital between $500 and $10,000.00 max.

Another truth is that most banks are not interested in loaning such a small amount of money to start a business. So, the $500 to $10,000.00 is not enough to entice a lender. It doesn’t make sense for them to lend that small of an amount they don’t make enough interest income.

Most couples end up using a credit card to start a home based business but I think going into debt to start your business is like taking one step forward and two steps back. If you are thinking about starting a home based business with your spouse, here are 3 tips for funding your business.

Have a limit: Give your business some startup capital from your savings but don’t keep feeding it. Have a limit to how much you are willing to lend your home based business startup. Remember it is a loan so you must also have a way to make monthly payments back into your savings account.

Really look at your startup costs: and slash anything from the list that you are not really going to need. Do you really need that new computer or do you just want a new computer? Don’t add unnecessary expenses to your startup. This is the time to be lean and driven.

Don’t keep feeding the business if it is not making money: This is hard to do when you are emotionally invested in the business but don’t keep feeding an unprofitable business. Find the hole in the business and either fix it or create another more profitable business. So, if the agreement between you and your spouse is that the new home based business has a credit line of $10,000.00 from your savings account, then don’t lend it anymore.

The real truth about funding a business is that most couples are on their own. You must plan carefully and be lean when starting a business. Most home based businesses need more sweat equity than capital investment and this is often the secret for couples who achieve success together.