If you are looking to start an enterprise, you will need start-up money. Oftentimes people get this initial money from a financial institution. In recent times, due to the economic crisis of 2008, lenders have been more stringent about who they give monetary assistance to. The Small Business Administration (SBA) has been trying to ease the requirements that enterprising individuals must submit to in order to secure small business loans, but despite help from the SBA you might still find it difficult to get a decent advance. Let’s explore the options available to the entrepreneur and look at some facets of the traditional lending model.

Traditional Financial Institutions

Obtaining these loans from banks is still a challenge, even with assistance and incentives offered by the SBA. A lot of institutions are looking for safe places to put their cash. If you want assistance from a bank with an interest rate of six to eight percent and a term of 10 years, which is what the SBA works to ensure, then you have to meet some pretty high standards in most cases. Typically, a bank is looking for an enterprise that has been operating for at least two years and brings in about 250,000 dollars annually. On top of this requirement, they also like to see good personal and business credit, as well as positive cash flow from your operation. Even if you manage to meet all of these requirements, you may still find yourself getting rejected because you lack a certain amount of collateral. Oftentimes the collateral they want to see is personal property. Financial institutions are wary of taking risks ever since the economic crisis of 2008, so if you want to secure small business loans, you need to assure them that their money is safe with you. This is easier said than done, but easing the mind of your lender is a good step to take.

Alternative Lenders

As a result of the difficulty that individuals experienced with traditional financial lenders, a lot of enterprising people have turned to alternative lenders for the cash that they need. You should be warned that these lenders will charge you three to five times the amount of interest and the term will be less than half of what a traditional lender would be able to give you. These deals are also not subsidized like SBA deals are; this is why you see higher rates and shorter terms. It is always preferred to take a guaranteed offer from a bank or credit union rather than an offer from an alternative lender, but you may not have that luxury. Small business loans are not very easy to obtain right now. If you have a rock solid idea that you are confident in, go ahead with an alternative lender, but you should always know what you are getting into, and keep in mind that 80 percent of businesses fail within five years.

If you are interested in small business loans, contact a financial professional and find out if you qualify!

When considering small business loans, NH residents visit Newburyport Five Cents Savings Bank. Learn more at www.newburyportbank.com/home/home.

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Small business financing (also referred to as startup financing or franchise financing) refers to the means by which an aspiring or current business owner obtains money to start a new small business, purchase an existing small business or bring money into an existing small business to finance current or future business activity. There are many ways to finance a new or existing business, each of which features its own benefits and limitations. In the wake of the recent financial crisis, the availability of traditional types of small business financing dramatically decreased.[1] At the same time, alternative types of small business financing have emerged. In this context, it is instructive to divide the types of small business financing into the two broad categories of traditional and alternative small business financing options.
Here’s a simple yet practical guide on how to go about preparing to apply for a small business loan.
1. What criteria do banks look for in making small business loans?
Different banks or lending institutions may have different standards, but in general, in order to consider your application for a small business loan, banks will require:
•The loan must be for a sound business purpose. For SBA-guaranteed loans, the business must be eligible based on size, use of loan proceeds and the nature of the business (no lending, speculating, passive investment, pyramid sales, gambling, etc.)
•You and your partner(s) are of good character, have experience and good personal and/or business credit history
•Ability to pay back the loan- reasonable to strong collateral (personal and business assets) is very important. SBA expects the loan to be fully secured, but we will not decline a request to guaranty a loan if the only unfavorable factor is insufficient collateral. And of course, owners must have personal equity investment in the business/skin in the game.
Money is the lifeline of any business, so whether you’re starting a business or running an existing one, securing financing is a major factor, especially for small businesses.
SBA small business loans range from about $5,000 (microloans) to $5 million (largest guaranteed) with the average loan around $371,000.
5. How can you get financing to start a business since many banks want to fund growth?

Start-ups are probably the most difficult ventures when it comes to securing financing. Many start-up businesses seek financing from family, friends and credit cards. If the credit is sound, the business plan strong and you have enough personal resources to invest and collateral to guarantee, smaller, community banks and other community financial institutions and Credit Unions may consider lending you money.
Your best bet by far is SBA assistance. Begin by visiting SBA’s website , where you will find a wealth of information not only on how to secure a small business loan but equally importantly, other services and training opportunities to help you succeed.
6. Are there associations that can help?
SBA works closely with a large network of partners that leverage SBA resources and are just one phone call away and ready to provide extensive help.
•SBA District/Branch Offices– at least one in every state
•SCORE– (approximately 300 chapters nationwide)
•SBDCs — Small Business Development Centers; (approximately 900 locations nationwide; associated with higher education institutions (colleges and universities)
•WBCs- Women’s Business Centers (approximately 100 educational centers nationwide)
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