What is a Small Business?
A small business is a privately-owned and operated business model. Based on the legislation, created in the Fair Work Act of 2009—a series of regulations set forth by the United States Department of Labor (DOL)—a small business, in the United States, is classified as a business model that is privately owned and does not have an employee based exceeding 15 individuals.
The legal definition of a small business will vary based on individual country and will range depending on the particular industry that a small business operates out of. In regards to the United States’ definition of a small business, the Small Business Administration mandates that a company must operate with fewer than 500 employees to meet the country’s legal interpretation. Furthermore, small businesses can also be classified according to other evaluation methods such as, assets, net profits or sales.
As a result of this definition, a small business must obtain some sort of financing or monies to carry-out their intended business model. Not every small business owner is a wealthy individual, meaning funding must typically come in the form of small business loans.
What are Small Business Loans?
Small business loans are avenues of financing or funding that is used by the owners and operators of small businesses to carry-out their particular functions. Small business loans can be used to finance a number of functions or projects within the larger small business model. For instance, small business loans can be used to pay the employees of the small business, the funds can be used to create the product or purchase the equipment necessary to establish the good or service. Regardless of what the funds are used for, all small business loans are a necessary form of financing that a small business owner needs to firmly establish their presence in a marketplace.
The majority of small businesses will rely on lenders to provide the capital they require to either establish a small business or to finance capital improvements aligned with the small business. Without small business loans, the majority of small business owners would be unable to fulfill their aspirations of opening a business or expanding their already-established small business.
The Role of the Small Business Administration:
The Small Business Administration does not directly partake in small business loans; however, the Small Business Administration is a vital governmental agency for those individuals who wish to finance or grow their own business. When you apply for a small business loan at your local bank or credit union you are seeking financing that is guaranteed by the Small Business Administration. This guarantee simply means that you are asking the SMA to provide a guaranteed loan that you will repay according to the particular repayment plan. The Small Business Administration has numerous programs that are varied with specific qualifications for the enactment of small business loans. That being said, the SBA can help facilitate certain small business loans for you and your coordinating third party lender.
Finding Small Business Loans:
In the United States, federal, state and local governments will offer a wide range of financing programs to aid small businesses start and develop their particular small business operations. These various programs include various low-interest loans, scientific or economic development grants and various streams of venture capital finances.
Tips for Getting Small Business Loans
If you are a small business owner, chances are you’ll end up taking out a small business loan at least once in the time you own the business. With small business loans, it is important to understand how they work and how to get them.
With so many different small business loans out there, you want to be sure that you are getting the best deal around. This can be done by best understanding the options. Use counsel to help you decide what is going to be your best choice and best investment.
Make a Business Plan
Business plans are what you are going to do with your business. Most of the time, to get small business loans you will need to make a business plan and show it to the lender. The small business loans will be set based off the business plan and how it is going to work. These plans should explain what your business will do and how it will do it. It will show the means to the end and give an investor or lender the idea in their mind that your business will be able to survive amidst all the other small businesses that are out there today.
Know what you Need
It is very important that you know what you need when it comes to small business loans so you know how much to ask for. You want to approach the lender one time, ask for an amount, and hope they approve it. You want this amount to be a number that is reasonable. You do not want it to be an astronomical figure or a low ball number where you are going to be back in a few weeks to ask for more money. Know what amount you need and ask for that.
Understand the Terms that are Reasonable for you
There are terms that you will be able to pay back with your small business loans and terms that will be out of your comfort zone. You want your business to survive, so come up with an idea of what you can afford to pay back and under what terms and ask for these terms. While you may not get it, it will give you a good idea of what is affordable to you and what options you need to avoid. Knowing what you can pay back will really help you understand if the loan that you are applying for is reasonable for you.
The best way to look over terms and conditions for a small business loan is through an attorney. You should always hire a lawyer before you sign onto any loan, especially small business loans upon which your whole business may hinge. It is well worth the money to hire an attorney to look everything over. Find one that specializes in contracts and will have all the information that you need to make sure you are getting a great deal.