There are many financial institutions that can offer small business loans. From your local bank to an online lender to The Small Business Administration (SBA).  The SBA is one avenue many entrepreneurs look to as they offer many type of loans to either startup a business – or to keep it running.  But like any loan, there are many criteria your small business needs to meet. These range from a good credit score to the feasibility of your business.  Below is a list from the SBA regarding the basic loan requirements:

• Operate for profit
• Be small (as defined by SBA)
• Be engaged in, or propose to do business in, the United States or its possessions
• Have reasonable invested equity
• Use alternative financial resources, including personal assets, before seeking financial assistance
• Be able to demonstrate a need for the loan proceeds
• Use the funds for a sound business purpose
• Not be delinquent on any existing debt obligations to the U.S. government

Alternative lending companies are another option for a small business seeking working capital.  At Imperial Advance, we act as financial consultants committed to assisting the growth of a small or midsize business that has a need for fast funding and less “red tape”. By presenting offers from our in-house fund and gathering offers from our extensive network of lenders these counter parties can provide the lowest rates and terms available for a small business. A dedicated financing specialist will work closely with the small business to present a range of financing options so that the business owner can choose the terms best suited for your business.

There is always the option of seeking a loan from a bank. At Bank of America, for example, there are several factors (called the four “C’s” the bank will consider before approving a small business loan:

Capacity

Does your business have the financial capacity to support debt and expenses? Typically a business needs to have $1.25 of income to support every $1 of debt service. The extra $0.25 provides a cushion for your business to absorb unexpected expenses or a downturn in the economy.

Capital

Your business owns capital assets such as cash and equipment; is there enough to help support the financing you want? You and others may have invested capital in your business; how much? The answers say a lot about whether the business is one in which the bank wants to invest.

Collateral

Accounts receivable, inventory, cash, equipment and commercial real estate are all forms of
collateral that banks leverage to secure loans. In addition to looking at the value of your collateral, the bank will consider any existing debt you may still owe on that collateral.

Conditions

The state of the economy, trends in your industry and pending legislation relative to your business are all conditions that are considered by banks. These types of factors—often out of your control—may affect your ability to make payments.

Character

Work experience, experience in your industry and personal credit history are all character traits banks will consider. Your personal integrity and good standing—and the integrity and standing of those closely tied to the success of the business—are critically important.

Small businesses have been called the “backbone of America” – the stalwart business model upon which American ideals of independence and innovation thrive. However, as issues such as healthcare, lending and compliance become more complicated, so does owning a small business. Today entrepreneurs may smile at the poetic terms referred to their line at work, but the day to day fight is less than glamorous.

The State of Small Businesses 2016 study by Babson which survey small business owners, iterates on the myriad of issues small businesses face today. The first being funding – which is usually the starting point for many entrepreneurs. Babson claims that the primary source of funding is through banks. Secondly, many small businesses reported they are frustrated with the restrictions on getting credit. This has been a great opportunity for alternative lending companies which offer business financing solutions to small businesses.

The study reports that trying to get small businesses approved for credit is a key issue and “…as is the continued capacity building of Community Development Financial Institutions (CDFIs) and other mission-driven lenders, which may offer more flexible rates and terms than conventional lenders.”

The next big bucket that Babson looked into was compliance. Many industries have strict compliance issues such as compliance with payment processing standards for consumer credit cards, for example. Sometimes it takes a significant sum of money, as well as time (Babson cites an average of 200 hours per year) to get up-to-date on changing rules and regulations. Most industries are forced to hire consultants to ensure the technology and equipment as well as training and compliance with industry standards.

Depending on the industry, innovation is also an important issue for small businesses. Many wish to grow and working on research and development can offer that competitive edge that often gives rise for growth. Babson reports that “…35% (of small business respondents) are engaged in research and development in a new product or service, 46% are in the process of launching a new product or service, and 62% are improving the quality of an existing product or service.”

Employment is always on small business owner’s minds. Whether they are hiring people to run their stores or oversee a laboratory, finding qualified applicants can be a challenge. This is always the case – no matter the size of the business. Training employees varies across industries and businesses, reports Babson. Some small business owners conduct one on one training while others send employees to classes and other training courses.

Healthcare is one challenge that many small businesses grapple with day to day. Babson cites that “…more than 90% of those surveyed are not subject to requirements under current healthcare regulations, and over half offer health care to at least some of their employees.” Most small businesses would like to offer healthcare benefits and responded overwhelmingly they feel it “is the right thing to do.”

Cybersecurity is another issue for many small businesses. Ensuring a business has the proper security protocols, firewalls and virus detection, is a must. The survey showed some shocking results when it came to technical prowess: “More than 40% of survey respondents feel ill-prepared for cyber threats, and nearly one in five has been the victim of a cyber-attack.” Upshot — small businesses need to take cyber-security more seriously and hire outside IT help if necessary.

In conclusion, Babson writes that education is one powerful way to overcome the challenges that small businesses face today. “While improved and expanded training and education is a key path to enabling the success of small businesses, it is not sufficient. Changes in policy and practice are also needed to enhance the business environment…” according to the Babson report.