Finding – then obtaining – small business funding to start or grow a business can be confusing. Interest rates continue to be amazingly low, and summer reports showed a surge in small business borrowing, up 25% in May and 28% in June, according to Federal Reserve Board Governor Elizabeth A. Baker).
So, why can’t you get your hands on it? Read on for three tips to help you get your fair share of small business funding.
Find a lender The US Small Business Administration has an invaluable website. Just click on your regional SBA office and enter your zip code for a list of lenders authorized to make loans for small business funding. The page provides banks, addresses, phones, and maps. It also provides extensive information on resources in your state and locale including workshops on loans and application.
Think small The SBA Micro-loan Program makes loans available for as much as $50,000, the average loan is more like $10 to 15,000. The loan can be used for most business purposes – except the payment of debt or the purchase of real estate. Interest rates are determined by the lender but must reflect current Fed rates. The lender has the right to demand collateral and continuing training for the borrowing owner.
Have the courage to borrow The Fed’s rates are close to 0%. The White House continues to press SBA approved lenders to account for their small business lending. Moreover, the banks decline fewer than 12% of the applicants and fewer than 5% of small business borrowers default on their loans
The overwhelming majority of small businesses start with personal investments – in addition to those of family and friends. What appears to discourage small business borrowing from approved lenders is the process itself. Applying for and obtaining small business funding is detailed and slow. Among reports oft required are detailed balance sheets, expense statements, business plans, and proof of a loan declined.
There are consultants lined up to show you how to make application for SBA loans, but you can do it yourself. Study the SBA website, attend a workshop, and talk to your banker and CPA. Among other things, this is good discipline: planning, detail, and patience are virtues you need to succeed, whether or not small business funding is something you need.
by Steven Schlagel