Small Business Loans for Small Business Owners

All Americans dream of owning their own business, and while most of us will never be corporate giants, many of us can more easily achieve the goal of owning our own small business. It will undoubtedly mean a dedication of energy and a long hours commitment to make this dream come true, but what most of us don’t realize is that it will also require a small business loan. We may need some startup funds to open the doors of our new hardware store or barber shop or we may need a small business loan to keep our garden center up and running through the long winter season.

Whatever the reasons for our small business loan, there are certain requirements that any bank or financial institution will ask us to meet before they lend us some of the money we have deposited over the years. Those requirements can be summarized as eligible and solvent in the eyes of banks and financial institutions. Once we can do that, we may be eligible for a number of forms of small business loans in order to be successful entrepreneurs.

The federal government’s Small Business Administration is a source of funds for small business loans. They make guaranteed amounts of money available for banks to provide to small businesses that meet the criteria mentioned above. One of the most common small business loans is called a 7 (a) loan. This refers to section 7 (a) of the Small Business Act and authorizes the agency to provide a number of financial assistance options to small business owners. Banks and other commercial lending institutions can access these funds to provide them to eligible small businesses, and while the bank lends the money, the Small Business Administration guarantees payment if the lender defaults on the loan.

To be eligible for a small business loan, the business must be able to demonstrate that it has the ability to repay the money borrowed. That means a business must be able to show proof of income and customers to the bank in sufficient amounts so that they can no longer operate, but they can also repay the borrowed money at the same time. Once this information is presented to the bank, they can make a judgment on the eligibility of the small business loan application.

The second criterion, being creditworthy, is a bit more complex and involves an investigation by the bank of the company and its directors to see if they have a proven history of paying their bills in the past. A document that can be requested is called a “Personal History Statement” from each owner or operator of the business to verify this information.