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:
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.
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.
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.
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.
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.