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5 Things to Consider Before a Small Business Loan

If you thought the economic meltdown was hard on the big banks, just take a look at what America’s small businesses had to go through. According to one survey by the National Federation of Independent Business (NFIB), a third of small businesses reported that they weren’t able to get any credit lines, almost a fifth had their loan or credit-card terms changed, and a quarter say their survival is now in question.

And unlike the situation with the financial giants, no one’s arriving with a big pot of bailout money. But while getting funding for your small business might be increasingly difficult these days, it’s not impossible. You just have to be realistic, get your paperwork in order – and know where to look.

1. Think small. While many of the banking behemoths are gun-shy about lending right now, it’s often a different story on the local level. Approach a smaller institution that knows your business and your community; find one at Then shop around for the best rate, by getting quotes from at least two or three banks, rather than accepting the first lending offer that comes along.

2. Use credit wisely. Small business-oriented credit cards are a handy way to secure a credit line, without as much paperwork as a more formal loan. Offerings like the American Express Plum card, for instance, boast perks like discounts for paying your bills on time – or extra time to pay, with no additional charges. In addition, many other credit card companies offer similar cards for business owners, including Chase and Capital One.

3. Seek out investors. Venture capitalists and angel investors could also be the ones to take your operations to the next level. Particularly in the technology space, it’s a time-honored way of securing startup cash – although you may pay a heavy price, in terms of handing over a percentage of the company. Find the right VC to pitch at the National Venture Capital Association. Also, Inc. magazine keeps a directory of Angel Investor networks and groups. Another common route to early cash for your start-up is to seek help from friends and family.

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4. Work with your clients or suppliers. Another thing to remember: banks aren’t the only ones with money. If you have a longstanding relationship with particular clients or suppliers, those organizations might be interested in making loans themselves. It can be a win-win; they’re keeping you in business, and making interest on the loan, probably much more than they could get by stashing cash in a savings account.

5. Make the stimulus work for you.The federal government may even ride to your rescue, in the form of the Small Business Administration. Part of the stimulus money is dedicated to helping small businesses who need a funding lifeline – up to $35,000, in fact, with zero interest and plenty of time to repay (up to five years). For the latest on such funding programs, check out the Small Business Administration’s website.

This article by Steven Millstein first appeared on and was distributed by the Personal Finance Syndication Network.

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