SBA Small Business Loans – A Huge Benefit to Start-Up Businesses

Setting up a new business is never easy. There are innumerable details that need to be taken care of. Start-up businesses are mainly dependent on loans for almost all their business requirements. It is therefore extremely important to find an appropriate and reliable lending source to cater to their financial needs. However, since most conventional lenders and banks are not keen on providing loans to new business owners due to various security reasons, opting for SBA small business loans can be an excellent idea.

Small businesses can contribute immensely in developing and enhancing the nation’s economy. The Small Business Administration (SBA), which is a United States government agency that provides loans to small businesses with the aim of improving the country’s financial condition. These loans are meant to support the establishment of small businesses by providing through adequate financial assistance. These loans cannot be obtained directly from SBA, but through a number of their lending partners working in accordance with the SBA rules and regulations.

The SBA offers a wide variety of loans that demand different qualifications of the borrowers. The various financial programs offered by SBA such as surety bonds, debt financing and equity financing are designed to cater to the different financial requirements of borrowers. In order to avail a loan from them, it is extremely important to understand how the SBA works. Let us discuss some basic rules and regulations of the SBA:

  • The SBA loans are provided to business owners at a lower interest rate than banks and other conventional lending sources owing to the fact that start-up business owners do not have adequate capital to opt for loans with high interest rates.
  • SBA does not provide loans to small business owners directly. Instead, they merely set certain rules and regulations that are strictly followed by their partners, including private-sector lenders, micro-lending institutions and community development organizations, who are authorized by the SBA to provide loans to start-up businesses.
  • The loans are provided to the business owners under an SBA guarantee to ensure that the loan is repaid on time to the lending partners. Business owners cannot avail SBA small business loans in case they have the eligibility to obtain loans from other lending sources on affordable and reasonable terms.
  • You can obtain SBA loans fast and without any kind of hassles. They can be acquired on an immediate basis as soon as they are applied for. This can be immensely beneficial for start-up businesses that need financial assistance for all their business needs. Delay in acquiring loans can create problems for them in setting up the business.
  • One of the most beneficial aspects of SBA loans is that they can be availed even if you have a poor credit record including bankruptcy, insolvency, IVA etc. It can be an excellent way to improve your credit records.
  • SBA offers various kinds of loans, including 504 for purchasing real estate and equipment, 7 (a) for common small business loans, disaster loans and microloans. Not all banks issuing SBA loans offer the same loan programs. Moreover, in accordance with individual bank policies, the loan requirements for a particular program can differ from bank to bank.

The SBA rules and regulations for small business loans are designed to help start-up business owners and can be extremely beneficial for them.

Five Small Business Finance Tips

Owning a small business involves much more than coming up with and implementing a business idea. Small business owners quickly learn that a huge part of their role as the owner of a business means learning how to take care of the financials. Here are several tips for small business owners who want to learn the best practices for managing their business’ finances:

1) Bookkeeping

To the dismay of many business owners, the ancient art of bookkeeping isn’t going anywhere. Fortunately, bookkeeping has become much easier. Bookkeeping programs can make the process much easier, but there are still certain fundamental rules that business owners must take into account. Firstly, business owners must always keep a record of all of the invoices processed by their business as well as the expenses they have incurred, such as raw materials, salaries, and operating expenses. While there is no solid rule for how to keep track of earnings and expenses, what matters most is that you keep track of your finances in a consistent fashion and that everything is written down. This is arguably the most important part of owning a small business.

2) Don’t Over-Exaggerate Your Earnings

When working with investors, banks, or other financial lenders, one of the biggest mistakes you can make is to exaggerate your business’ earnings. These lenders need to know how likely you are to repay the money they have lent you when making their decision about whether or not to lend it in the first place. Lying or exaggerating about your earnings will only harm you and the lender in the long run.

3) Make Sure All Of Your Funding is Backed by a Legal Contract

Regardless of where you are going to receive funding, you need to ensure that the terms of your financial agreements are written down on a contract. Unfortunately, things can become troublesome during the repayment process and it is therefore urgent that you and your lender lay out terms in the beginning that you must adhere to later on. This keeps both sides accountable and also ensures that both sides know exactly what they are getting into before the money starts circulating.

4) Cash Flow

A successful small business always maintains a sufficient amount of cash on hand to take care of daily operations and unexpected expenses. However, many businesses that have been successful in receiving funding find that the money they are lent covers already-existing expenses but doesn’t quite leave enough cash left over to keep on hand. This is why small business owners are familiar with the feeling of being stuck somewhere between outstanding invoices and bills that are past-due. One option for small business owners is to use a merchant cash advance. These types of business cash advances can provide small businesses with additional cash flow to meet these expenses or to grow their business, and they are repaid through future credit card receivables. This is an important option to consider for many small business owners who have been denied other forms of funding.

5) When to Process Credit Cards

The short answer: Now! Being cash-only is extremely inconvenient for most customers. While setting up a credit card processing system can be costly, your customers may find it more convenient to go to your competitor’s business once they learn that your business doesn’t process credit cards. Furthermore, using credit cards at your business functions as an instant line of credit and means less hassle and paperwork for your business. This can cut down on lengthy credit approval processes. Also, there are additional types of funding available for businesses who process credit card transactions as opposed to those who don’t.

Innovative Ideas? Business Loans Are Your Answer

New businesses come and go every day and innovation is part of each of those new businesses. Starting a new business takes conviction and guts but it also takes money. So if you have got an innovative idea that you want to see turn into a prosperous business but you don’t have the financing you need then it’s time to explore small business loans to see your idea come to life.

If you are hoping to get your venture off the ground but not only don’t have the cash you need, you also don’t want to put your assets up as collateral, and in these situations, business loans are a great idea. They require you to put up only a small amount of assets as collateral, and for you as the borrower this is a close as it gets to a no risk loan. You can’t ask for much more than that!

When you obtain one of these business loans there generally isn’t any restrictions on how you must use the money within your business. You might use it to buy stock, assets you’ll need like computers, for raw materials, machinery, or put it away to pay for wages at a later date. Whatever you’ll use the money for, the key is that the lender doesn’t restrict you.

When considering business loans it’s important that you take some time to research the various lenders because not only do they offer different business loan packages they have different interest rates, and different qualifications. You also want to determine the reputation of the lender to ensure there’s no problems down the road. It never pays to deal with a lender that may not appear to be on the up-and-up, no matter how good their terms seem to be. And there’s always the old stand by “if it sounds too good to be true it probably is.”

If your credit isn’t so hot due to an unavoidable situation in the past, not to worry because there are business loans that can be easily obtained. The interest rates might be a little higher but definitely worth that cost, just to be able to obtain such a loan. It’s also a great way to get your credit back on track and start to rebuild it. With a little research, you can also find the best interest rates for this type of business loan too.

Small business loans let you get money to take your innovative idea from a dream to a reality. No collateral, no restrictions, and good credit or bad credit there is a business loan for you out there.

Innovation on a Small Business Man’s Budget

One of the biggest advantages of small business is that they can move at lightning speed, but only if they realize that. Many small businesses throw away this advantage and hesitate due to the risks that they perceive. Some of these risks maybe real, but often they are merely fear (F-E-A-R = False Expectations Appearing Real).

What small businesses may not comprehend is that they can quickly recover from a mistake and move on, taking what they have learned with them, thus, doubling their chances for success next time they try something similar.

It is this type of tinkering with their business models, products, services and marketing that often allows them to “get lucky.” (Luck = when opportunity meets preparedness). A small business that tries new things and is constantly innovating will find themselves able to adapt quickly when a customer requests something out of the ordinary.

This is because each time they try new things they learn their limits, abilities and of new possibilities as well. Small businesses have a huge advantage, because they are agile and without bureaucracy, thus, they can easily outpace their corporate competitors in their niches.

In fact, it is usually the small businesses that do most of the innovation and the corporations that buy these ideas, small businesses or copy what they are doing. Why do they steal and copy ideas? Well, because they work.

A smart corporation will try to be innovative and to their credit they do come up with some cool innovations in the market place, but certainly not the majority of the ideas or concepts, especially the ones that really change the industry. So, please consider this.