Applying for a Small Business Loan Today - All that is New
There are some people who having lost their job in the recession and have dutifully tried for a whole year to get a job. And the experience has taught them to not ever put themselves in a position ever again that they would need to look to someone for a job. To some, the move away from a job is all about giving life to their own business concept; to others who would like a little practice running a business first, trying out the franchise model sounds just right. Starting a new business, you need cash for about a year in living expenses, you need motivation, you need plenty of contacts, you need to love what you do, and of course you need capital. Of all the kinds of loans out there, the small business loan has been the hardest hit; traditional outlets for finance and credit have been so burned by the terrible losses they took giving away loans without enough collateral or caution that they're going the other way now, running away from any kind of loan that isn't completely backed up.
Curiously, the Small Business Administration that the Obama government has been totally pushing as the credit savior the country has been looking for, isn't the one that actually does any small business loan making, unless it is to help with a financial disaster. What the SBA does is, it stays by your side when you apply for a commercial loan at the bank. It is the guarantor you always wanted in a friend. Each year, the SBA has the back of thousands of small businesses applying for loans. They sign on the form, and guarantee that your loan will be paid back to the bank.
So what do you do to apply for a small business loan with the SBA's guarantee and stamp of approval? You need to approach a local bank that qualifies for SBA approval. The agency's 7(a) program is its best-known plan; it is available to wholesale businesses that employ fewer than 100 people; and it will guarantee loans for small retail businesses that do no more than $21 million in business every year. If you are looking for a loan for equipment for your business, you can get a repayment term of up to 25 years; and if you want working capital, you can get terms of up to 10 years.
The SBA will typically guarantee no more than 85% of any small business loan under $150,000. And as the borrower, you pay them a lender's fee of about 2% of what you get. You can look forward to special loan programs if you've just come out of active duty, or if your husband or wife is in active duty right now. If what you have in mind is a really tiny loan of under $35,000 that you don't expect to keep longer than a year, they have special quickie micro-loan programs for just such purposes.
But there are better alternatives than the one above (especially if you have a business that's already up and running a little bit). On Deck Capital, a company trying to revolutionize the small business loan sector. The problem with approaching a traditional bank is that they don't really have much experience in making a small business loan. On Deck on the other hand, researches the Internet to look for how creditworthy a business is, and makes loans with no collateral. It gets repaid by tapping your bank account directly for a few dollars each day. There is a catch of course - they charge an annualized 36% interest.