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Tags: finance, commercial loans, financing your small to medium business
 A small business or enterprise by definition is an entity that is independently owned and operated with a minimal number of employees, under 100 in the United States, and relatively low volume of sails. In comparison, if there are more than 100 but less than 500 employees then it would be called a medium sized enterprise.
If you have a small business it could face a variety of problems because of its relative size which may result in bankruptcy, usually due to under-capitalization. Properly financing your small to medium business is important, especially if you want to prevent such a scenario from happening. You have several options to get an infusion of capital.
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You can self-finance using whatever cash you have in hand from you own pocket and savings or you can get what is called an equity loan for your home or any other assets, like your car, that you may have. You may be tempted to finance through credit card debt.
However, this would be a poor choice for you, given that the interest rates on credit cards are often several times higher than the rates that you would otherwise pay on a financial line of credit or bank loan. If you have well-to-do relatives and/or friends you can try and get a loan from them.
You can offer a private stock issue to these same relatives or friends in return for their money. You can also get same minded people and form a partnership wherein your new partners would be bringing in the infusion of capital while you retain management control. Seeking out Angel Investors is another way to go.
These investors are affluent individuals who provide capital for enterprises such as yours, usually in exchange for convertible debt instruments or even ownership equity in your company. If you don’t want any partners or other people owning part of your enterprise you can also go with small business financing which may include collateral based lending and even venture capital.
In the US, the Small Business Administration (SBA) manages loan programs meant to assist a small business like yours obtain loans. The SBA's mission is to enable people to establish and support the viability of small businesses in order to strengthen our economy. Other than making loans to small business entities they also act as guarantors on bank loans as well.
They also work with the government to get procurement contracts for small businesses, and assist them with management, technical and training issues. Primarily, the program is to make loans with longer repayment periods and looser affordability requirements than normal commercial business loans. They are not generally for persons with bad credit nor are they for start-up funding.
These SBA loans are often used for commercial mortgages on buildings occupied by a small business because unlike banks, they do not require you to refinance every five years. The SBA 7(a) Loan Guarantee Program is designed to help start or expand your small business by providing capital through bank and non-bank lending institutions.
The 504 Fixed Asset Financing Program provides the funding for buying the land or for construction purposes. A lender must provide 50% of the financing, a certified development company provides up to 40% of the financing through a 100% SBA-guaranteed debenture, and the applicant provides approximately 10% of the financing.
Other loans include those given to entities considered un-bankable in the traditional banking industry, or those owned by people considered to be socially and economically disadvantaged. The lower re-payments, longer terms and looser affordability calculations of an SBA loan would allow you to borrow more money than you could going through standard banking.
The dollar amounts available for loans are limited so you need to act quickly.
About the author
The author of this article Rick Goldfeller is a successful underground Financial Analyst who has been advising and coaching individuals for many years. Rick recently published a book on how to manage your money and attract Wealth and Financial Freedom. More info on his Finance Planning course is available HERE.
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