The How of Business Podcast – Money & Lending Episodes
These episodes of The How of Business podcast are on the topic of Money and Lending to fund the start and growth of your small business.
Where will you get the money to start or expand your small business? Should you borrow money or bring in private investors? Should you get a conventional or SBA loan?
One of the most critical components of starting a successful small business, and surviving over time, is the supply of adequate funding. From the money you will need to build your business initially, to the working capital required to you get through a cash flow shortage – the success of your small business depends on your ability to invest enough capital to allow you the opportunity to succeed. Refer to the FAQ at the bottom of this page for information of small business loans.
Frequently Asked Questions about Loans to Start or Grow a Small Business:
1. What are the different types of loans available for starting or growing a small business?
There are various types of loans you can consider for your small business, including:
– Small Business Administration (SBA) loans
– Traditional bank loans
– Microloans
– Equipment loans
– Business lines of credit
– Invoice financing
– Crowdfunding
– Peer-to-peer lending
2. What is an SBA loan, and how does it work?
SBA loans are loans provided by the Small Business Administration, a U.S. government agency. These loans are designed to assist small businesses by offering favorable terms and conditions. The SBA guarantees a portion of the loan, reducing the risk for lenders and making it easier for small businesses to secure financing. Related episode: 456 – SBA Loans with Ray Drew
3. How can I qualify for an SBA loan?
Qualification requirements for SBA loans can vary depending on the loan program. Generally, you’ll need to meet the following criteria:
– Have a for-profit business operating in the United States
– Meet the SBA’s size standards for small businesses
– Demonstrate a need for financial assistance
– Show that you have invested personal equity into the business
– Have a good credit score
– Provide a detailed business plan and financial projections
– Be able to repay the loan
4. What are the advantages of getting an SBA loan?
SBA loans may offer several advantages, including:
– Lower down payments and collateral requirements
– Longer repayment terms
– Competitive interest rates
– Access to counseling and assistance from the SBA
– Ability to finance a wide range of business needs
5. How long does it take to get an SBA loan?
The time to get an SBA loan can vary depending on factors such as the lender’s processing time, the complexity of your application, and the loan program you’re applying for. Generally, it can take several weeks to a few months to complete the entire process.
6. Can I use an SBA loan to refinance existing debt?
Yes, the SBA offers loan programs specifically for refinancing existing debt. This can help small businesses improve cash flow by obtaining better loan terms or consolidating multiple debts into a single loan.
7. What can I use a loan for in my small business?
You can typically use a loan to start a new business, expand an existing one, purchase inventory or equipment, refinance debt, hire employees, fund marketing campaigns, or cover operational expenses. However, the specific purposes may vary depending on the loan program and lender.
8. What documents do I need to apply for a small business loan?
While the exact documentation requirements can vary among lenders, you will generally need the following:
– Business plan and financial projections
– Personal and business tax returns
– Financial statements (balance sheet, income statement or P&L)
– Bank statements
– Business licenses and permits
– Legal documents (articles of incorporation, contracts, leases)
9. Are there any alternatives to traditional loans for small businesses?
Yes, there are alternative financing options available for small businesses, such as crowdfunding, angel investors, venture capital, and grants. Each option has its own requirements and considerations, so it’s essential to research and choose the one that aligns with your business goals.
10. What should I consider before taking on a loan for my small business?
Before taking on a loan, it’s important to consider the following:
– Your ability to repay the loan
– The impact of loan payments on your cash flow
– Interest rates, fees, and repayment terms
– Your creditworthiness and eligibility
– The purpose and potential return on investment for the loan
– Alternative financing options and their suitability for your business
Remember, it’s always advisable to consult with financial professionals or small business coach or advisor to determine the best financing options for your specific business needs.
The How of Business podcast, hosted by Henry Lopez, is focused on helping you start, run and grow your small business.