If you decide to operate a small business, you will find that finances will be needed to sustain the business. There are small business loans available for many types of business. If you wish to apply for a small business loan, associations such as the Small Business Association (SBA) offers counseling and services for small business. A small business owner may even take classes that prepare them for the loan process.
Features
Many loans are available to a small business, such as a secured or unsecured loan. If you acquire an unsecured loan, you must have good credit and a proven good business track record. A secured loan requires collateral to be placed by the business owner in the event the loan is not repaid. This type of loan is usually acquired by those who don't have good credit. Most business owners use any valuable assets as collateral in acquiring secured loans.
Function
To acquire a small business loan, the owner should have a business plan written. Most lenders decide how much they wish to lend based upon how well the business plan is written. The business owner should also ensure his credit is good and that his credit report is updated. If there is a circumstance that contributed to any negative inquiries in the small business' credit files, the owner should write a letter to explain the reason and provide this to the lender.
Types
The most common type of small business loan is a working capital loan. These loans are regular loans available to small businesses; the interest rate is dependent on the credit history of the business. Another type of small business loan is an accounts receivable loan. These loans are short-term loans that allow small business owners to use their accounts receivable as security. Since the loans are short term, the interest rates are usually higher than those of a normal loan. A business-only loan is a type of loan the lender gives only based on the business' credit history and does not include any of the business owner's assets.
Significance
Small business loans can be used to purchase equipment for the business or assist in marketing for the business. There are many other ways that a small business loans can significantly benefit the business. Many small businesses require finances in the start-up phase of the business. A small business loan can help the business start, expand or operate.
Warning
Many websites advertise services that guarantee small business loans to small businesses. Many lenders do not charge a fee for small business loans applications. If you decide to use solicitors that charge a fee for an application, be sure to verify these companies with the Better Business Bureau.
