The backbone of the U.S. economy is supported by small business owners. These newly created businesses are the primary source of new jobs in the U.S. economy. Start-up’s account for more than 50 percent of the private workforce in the U.S. That is more than half of the GDP.
Financing is the major setback for aspiring entrepreneurs. Insufficient funding is blamed for the failure of many new businesses, but having cash wont be the end all. This is only one part of the solution. When you apply for a small business loan the risk assessment processes must be taken into consideration. In order for a banker to make a well rounded decision, a business will be reviewed using the 5 C’s of credit: Character, Capital, Capacity, Collateral and Conditions.
Another very important step in obtaining a loan is having a bulletproof business plan containing an executive summary, market analysis, company profile and an organization description. In order to show the lender you are a low risk, a variety of questions must also be answered.
Some questions usually asked are:
- How much money is needed?
- Where will the money be spent?
- What will be done if you do not qualify for the loan?
- How long until you expect to see a profit?
Short-term loans consist of lines of credit, working capital, and accounts-receivable loans, and generally mature in one year or less. This is enough to get through the inactive months in a seasonal small business. Long-term loans are generally used for major business expenses and usually reach maturity in one to seven years. These can also be used to assist through a dormant period. The most common programs offered are: working capital lines of credit, credit cards, equipment leasing and letters of credit. If you are looking for financing options to help grow your small business, contact us to discuss the options that will be best for you.
