Bank loans for business

Small businesses have historically had difficulty getting loans from big banks. But in 2011 loans guaranteed by the SBA hit record highs. This would seem to mean that it should be easier than ever to get a loan for your small business, but this is not the case. Conventional lending practices are tightening their belts and approval rates are dropping.

In addition to small business loans being more difficult to get approved, credit offered to small businesses (business credit cards) are coming with more unfavorable terms.

As a small business owner it is important to recognize the inherent challenges in getting funding, and the dangers of getting the wrong kind of funding. Consider the following;

To get funding-
1. Do market research- Banks and lenders like to know that you are aware of your market, of your competitors, and how you stack up. They want to see your strengths, weaknesses, and opportunities within the market. Doing some market research will help you to recognize your own areas of needed growth as well, and you can make changes before applying for funding in order to present a stronger front.

2. Write a business plan- Lenders want to know that your small business is organized and has a specific plan in place in order to grow and earn enough money to be able to pay back the loan. A good business plan can really aid you in getting funding, so take the time to create something worth looking at.

3. Be specific about what you need money for, and how you will pay it back. Show the lender how the money will be utilized, and how it will help you to increase the amount of capital you have so that you can pay back the loan and interest. Lenders need to see that you are not just hoping to be able to pay them back, but have a plan in place with the numbers crunched, and that makes sense and appears to be legitimate.

4. Apply to the right lenders. One of the biggest mistakes a small business can make is applying for the wrong kinds of loans or to the wrong lenders. Various lenders specialize in specific loan types, so if you know you want PO financing, look for a lender that specializes in that. The point is, when you go to the gas station convenience store for milk, you get a lot less, and it costs you a lot more than if you go to a supermarket. This holds true for loans as well, especially as there are tons of different small business loans out there. Know your options, and determine which best fit your needs.

To protect yourself-
Be careful about the kind of credit or funding you opt for. Bad terms can make your life a nightmare financially. Look for credit that will help your business not hurt it. Read the fine print, it does matter! Think worse case scenario. You may think the credit card rate of interest does not matter because you plan to pay your balance in full each month, but what if there is a month you can't?