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In the present tight credit economy, it is increasingly difficult for small business entrepreneurs to find money for staring a business. Yet, it is still possible to find small business loans if proper business planning has been completed. Before starting on the process of securing a small business loan, it is also helpful to know that a small business loan can be used only for major business purposes.

What Can Small Business Loans Be Used For?

• First, the small business loan can be used to buy the real estate to accommodate the business.
• Second, the loan can be used for construction or renovation of the business site or building.
• Third, the loan can purchase machinery, equipment, fixtures, and furniture for the business.
• Lastly, the loan can provide inventory or capital.

If a small business loan is needed for one or all of these purposes, then there are steps to follow to help to secure small business loans.

The first step a would-be small business owner needs to do to secure a loan is to write out their small business plan. A small business plan defines the business. It also answers questions potential lenders will ask. Small business plans should answer the questions:o How much of a loan is needed?

• What is the loan going to be spent on?
• How long will it take to repay the loan?

A small business plan should be detailed and well thought out, and it should also be accurate. A bank or other lender will not make available a small business loan unless a business plan is presented which answers these questions and shows the business development and feasibility of the business.

The second step for a would-be small business owner is to know his or her credit history. If there is a late or missed payment on a credit report, there better be a good explanation. Anyone can obtain a credit report from the three big credit bureaus, Equifax, Experian, and TransUnion. It is essential to have a clean credit report; otherwise a small business loan might not be obtainable. Lenders will cite risk factors if an applicant has a poor credit history.

The next step is to shop around. If one bank doesn’t lend the money, then look for another one. Large banks are not the only lenders available. They are more focused on credit history and risk factors. Many smaller community banks might be more willing to lend money if the business owner can prove his or her business is feasible and likely to succeed. Smaller community banks are more likely to want to invest in the local economy. Another possibility in searching for small business loans is to check out the United States Small Business Administration (SBA). The SBA does not offer loans, but they act as a guarantor of loans made by other lending institutions. They offer a way to obtain financing through the Basic 7(a) Loan Program. The loans are obtained through a private lender, not the government. However, the government guarantees the loan to the lender. The SBA has a list of participant lenders in the program.

Small business loans are still available to the business owners who plan well by completing a business plan and shopping around. Be prepared to answer questions and defend the feasibility of the business.