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Small Business Loans: Types and Qualifications

Small business loans to help entrepreneurs get off to a strong start and stay in control of their business for years to come. As an entrepreneur, you need to plan for every possibility and make plans for your business. If you don’t have your ducks in a row early on, you may find that you are unprepared should an opportunity arise that you don’t have the experience or money to handle. You need to do those things without exhausting your resources or interrupting your cash flow so that you go to a lending firm to borrow money to assist you bridge the gap. Here are five tips that can help you keep your small business cash flowing.

Small business loans can come from local banks and credit unions or from large financial institutions such as Citibank, Bank of America, Wells Fargo and Chase. These lending institutions are eager to finance a small business because of the potential for long-term profits. 

When you go to them for small business loans, you will be able to access a variety of financing options including the following: traditional financing through a bank; personal financing through family and friends; and alternative financing such as debt and equity loans and business investment programs. Although most banks offer unsecured loans, you can also find opportunities with secured loans from credit unions and large businesses. A good recommendation from a trusted mentor is always a good idea.

Small business loans can be used for a wide range of purposes such as purchasing office furniture, expanding existing product lines, adding employees, or buying supplies for your plant and equipment. Because they are not highly targeted at a specific market, there is no loss of income if the business fails. In contrast, large banks have a great deal at risk if they do not provide a favorable loan package to startups. That is why working with smaller banks that you know and trust is a wise decision.

There are many different types of small business loans available to startups. You can obtain startup loans through banks, credit unions, credit companies, or investors. The different types of small business loans are unsecured or secured. An unsecured loan does not require any collateral to back up the bank’s promise to issue the funds. The downside of this is that this type of loan carries a higher interest rate and loan fees than secured loans.

Two of the most popular types of small business loans are debt and equity financing. Debt capital comes from either private sources (i.e., from personal savings) or from a bank. Equity financing is provided through stock sales and dividends. Typically, the more tangible assets a business has, the easier and more profitable it is to obtain equity capital.

To find a reputable lender, work with a financial adviser who can help you obtain the small business loans you need. In order to qualify for financing, you must be able to show that your company is viable and will generate profits. For an evaluation, your adviser should look at several factors including potential profitability and future growth. It is also important that you work with a reputable lender as this will help ensure that you do not default on your loan. 

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