What you should know about small business financing

The reality is that at some point in the business cycle, most businesses find themselves needing to take out a loan. This can be an overwhelming process, and many business owners find that it is time consuming as well. Worse yet, you may invest considerable time and resources in seeking out funding; only to come back empty handed. However, before you completely give up, there is information that can make the process a little more manageable. If you are seeking funding and have the right tools you are much more likely to find the money you need. Here is what you should know about small business financing-

• You should be ready to contribute financially-The bottom line is that you should be ready to make some financial contribution of your own. While assets help, (especially assets that lenders will see as collateral), your lender will want to know that you are invested (financially), in your business. Keep in mind that some government sponsored small business loans and grants, demand an applicant contribution. This is often of a set percentage of the small business funding that is being sought.
• You will need to have a solid business plan-It is crucial to understand that there really is no way around this and no shortcuts. The reality is that anyone who might seriously consider giving you small business funding, will want to see one. The business plan will need to include:the financial details, such as an income statement, cash flow projections and a balance sheet. If you are feeling overwhelmed with this step, keep in mind that there is more help for putting together a business plan than ever before. Check in your community, for organizations, that offer local assistance ranging from research help through business plan courses. Some business owners also find business plan software useful. There are also many models and how-to articles online. Many online tutorials will lead you through the process, and explain how to research, and write each section of the business plan.
• You should remember that there will have to something in for your lender- It is especially important for your business plan or pitch to reflect this. If you're trying to get a small business loan, you will want to make the 'what's in it for them' obvious. Keep in mind that some potential investors might actually want to an ownership percentage or at least a say, in how your business is run. Angel investors will often want to play some sort of active role in managing the business. Typically, these types of investors are also looking, for higher rates of return than they could realize with more traditional investments. It is important to keep in mind that when you are putting your small business funding proposal together, you should understand and know what type of lender you're trying to entice. This way you can tailor your business plan accordingly, to meet that lender's needs, and answer all his or her questions.
• You should understand that the main sources of small business funding are banks and credit unions-While most entrepreneurs are left to fork up cash from their own pockets, the most traditional sources of financing, are banks and credit unions. Despite what you may hear on the evening news that makes your own bank a good place to start your search for small business funding. Conversely that doesn't mean however, that getting small business loans is easy. Studies have found that traditional small business loan suppliers (such as banks) are becoming ever more conservative, in their evaluations of prospective small business loan customers. In addition, new businesses are having the hardest time finding the business start up financing they need. To counteract this trend, make sure that you spend enough time putting together an attractive small business funding proposal. Make sure that you meet a lender's expectations and increase your chances of securing the small business financing you need.