Most Americans have a series of dreams that they hope to achieve in the lifetime. They include owning their own home; raising a family and seeing them head off to college. Those dreams often include having their own small
business. The good news is that millions of Americans achieve that goal every year. The bad news is that many more can’t make that happen because they don’t have their own capital or the credit to be able to get a business start up loan.
You would think that access to capital would be the easiest thing in the world for the greatest capitalist country in the history of the world, and in many ways it is, just not the kind of capital that is easily encouraged to invest in a business start up loan. The major reason that it is difficult to obtain a business start up loan is lack of experience in both operating a business and in utilizing business credit. The other reason is risk.
Banks, credit unions, and other lending institutions like to lend money, that’s their business. They lend money out, charge a reasonable rate of interest for the use of this money and then rotate the money out again in the next loan arrangement. But banks are also risk adverse. They don’t like taking chances with their money and many of them see a business start up loan as too much of a risk to take.
The reality is that hundreds of businesses open and close their doors permanently every year in America. Some fail because the business idea wasn’t as brilliant as originally thought, some fail because of management negligence of inexperience, and some fail because the owners do not have the necessary capital to finance the on-going operations of a business trying to break into a competitive marketplace. The banks are observant of this activity and they are also aware that a great percentage of small businesses do not make it past the first year of operation and by the second year the attrition rate is staggering.
So getting a business start up loan is not easy. But that doesn’t mean it is not possible. The best way to get a business start up loan from a bank or credit union is to prepare a solid business plan. This plan should include a survey of existing similar businesses in the marketplace, an identified need for the services or products being provided, and a clear and compelling argument as to how the business can meet that need. The banks want to be convinced that the business can survive before it will even consider providing a business start up loan. Even then the bank may ask for personal guarantees, a co-signer for the loan, or collateral to back up the request for a start up business loan
David Gass is President of Business Credit Services, Inc. His company publishes a weekly e-newsletter on Starting and Growing a Small Business at http://www.smallbusinessconsulting.com. You can sign up for their free newsletter by visiting http://www.smallbusinessconsulting.com.
Tags: Building Loans, Business Credit Cards, business line of credit, small business, Small Business LoanBuilding Loans, Business Credit Cards, business line of credit, small business, Small Business LoanShare This
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business line of credit is one of the most popular forms of business loans. For the business owner or operator, particularly for small businesses, a business line of credit can be a lifeline of financing that can allow them to pay their bills, meet their payroll and continue to operate even when times are tough or business is slower than usual. For banks and lending institutions it allows them to hold the business on a short credit lease while they determine their viability in the marketplace.
The good news about a business line of credit is that it usually easy to get, even for businesses that have not been in business for a long time. The bad news is that financial institutions like a bank or credit union often will want personal guarantees or co-signing arrangements before they hand over access to a business line of credit.
A bank or other lending institution usually requires a business to have been in operation for a minimum of two years before granting a business line of credit. That is because the likelihood of a business failing within the first two years is far greater than at any period in its term of operation. Once a business passes this threshold a bank is much more likely to consider a business as a candidate for loans or lines of credit.
A business line of credit can be used for short term cash flow management, to make special or seasonal purchases, to re-stock inventory or supplies or for just about any other reason that can satisfy the banks demand for its usefulness to the business. A business line of credit is not normally made available to pay for salaries or bonuses to the employees of a business or to repay creditors from other banking arrangements.
These funds can be made available to the business in a number of manners under a business line of credit. They are sometimes available in a revolving cash account that can be borrowed against up to a certain amount or even in the form of a credit card that can be used by the company to make purchases for the business as required. Some business lines of credit require minimum payments plus interest every month and others have interest payment only options.
To see if you qualify for a business line of credit it is best to approach a bank or credit union where you already do your business banking. They know you, not just from seeing your face as you make deposits or withdrawals but they also know your personal credit history and this becomes an important factor in granting a business line of credit. Banks are most comfortable lending money to customers that they already know than the off the street business. This will help you not only get the business line of credit that your business may need but also help you get the best possible interest rate for your hard earned business dollar.
David Gass is President of Business Credit Services, Inc. His company publishes a weekly e-newsletter on Starting and Growing a Small Business at http://www.smallbusinessconsulting.com You can sign up for their free newsletter by visiting http://www.smallbusinessconsulting.com
Tags: Building Loans, Business Credit Cards, business line of credit, small business, Small Business LoanBuilding Loans, Business Credit Cards, business line of credit, small business, Small Business LoanShare This