Small Business Loan
Qualifying for a small business loan
Small business loans are set in place by private institutions or the Small Business Administration to help owners of small enterprises finance their operations. Typically, these loans have lower interest rates and a longer debt repayment schedule to help small business owners keep their money in the business rather than putting it toward repayments. Small business loans can be offered by the government, and government small business loans and programs are often designed to support certain business types.
Qualifying for a small business credit option can be tough if you have bad or no credit. There are typically five factors that an institution will consider before lending money to a prospective small business owner. These include credit history, vested interest, working capital, ability to repay and experience and character. As a rule, the institution will look at your personal credit history and any other business credit history you may have. They will also consider how much money you have saved or are putting up for your business to help determine the amount to lend. Last, they will evaluate your character (which will mean business and personal references) and your ability to repay the debt.
Types of Small Business Loans
There are several types of small business loans available for different types of business owners. They include:
- Minority small business loans. Much like minority small business grants, these are set up by minority-run credit unions or private institutions in order to help small business owners of a visible minority. These loans are only for those of this minority and may include lower interest rates or debt repayment.
- Small business loans for women. Because women are considered a minority in the business world, female small business owners may be able to access loans and grants just for them. Like a minority small business loan, these loans may include lower interest rates and easier debt repayment plans. The lending organization may also finance part of the loan.
- Unsecured small business loans. These are normally for owners with extremely good credit and a large vested interest in their business. They are the hardest business loans to get, but offer the best terms.
- Secured small business loans. These are for owners with bad or no credit. While they do help rebuild credit, they have the worst terms, with sky-high interest rates, and often require quite a bit of collateral up front, as well as a faster debt repayment schedule.
Obtaining a small business loan can be tough if you don't know what you need to qualify. Do your research at the nearest branch of your SBA or online.