Small businesses are generally private corporations or partnerships. Its definition with reference to the number of employees changes with location. In USA, a small business usually has fewer than 500 employees and according to European Union, it has about 15 employees. There are several other means of classifying small business by considering factors such as net profits or sales. Small scale industries, restaurants, guest houses and bakeries are some of the most commonly seen small businesses.
The coming up of small businesses has increased fairly over recent times because of the advantages that it holds. For example, a small business would require a much smaller start-up cost and it would be able to offer the best to its customers with its quick changes according to new demands.
But it is very important to lay out a proper strategy and planning before diving in business to avoid bankruptcy. The first step to proper planning would be to find a suitable deal with the loan.
At times, personal savings may just be enough. But for some, personal savings are for life after retirement and they do not want to spend it on starting up a business. For them, loan is the only option. Depending on your location and preferences, there are various ways to find a loan.
The first option would be banks. Banks do provide loans to finance small business requirements for usually a short time period. However, banks usually require collateral and detailed explanation of how much money is needed and for what purposes. Some banks may even want to know your recent income, credit history and other personal information. With business, it wouldn’t be hard to pay back an amount every month along with interest depending on the profits acquired. Sometimes, it may be difficult to get a loan if we require an amount lesser than the minimum amount that the bank has got to offer. In such a case, you might have to look at the other options for getting a loan.
Federal, state and local governments offer a wide range of financing programs to help small businesses grow and in turn help the country’s economy grow. SBA or Small Business Administration loans are guaranteed by the government even though it is given by the banks. You can obtain it if you don’t qualify for a regular business loan. There are a few conditions to get this loan. First of all, your business must fall within the size guidelines mentioned by the SBA. Secondly, the business must be owner-operated for profits. As the SBA is guaranteed by the government, it has fewer conditions to get a loan. It even accepts low payments over longer periods of time. There are special SBA loans available for veterans, reservists, National Guard members and their spouses.
If you have a credit card, it can also be used to pay for the start up costs. But, unless you have a card with required limit or a low interest rate to be paid at the end of each month, it can be quite troublesome as debt increases. If you have the advantage of a low interest rate on the credit card, make sure you pay back before it goes up.
Much similar to the above option in the sense that any amount can be taken in multiple times instead of a large amount at once, a business line of credit has fewer conditions than a regular business loan. These loans are usually short term and have variable interest rates. Some banks may only offer a large amount, but depending on your requirement, this may be the right option or not.
Lastly, family and friends may be capable of giving you a loan, depending on the nature of your relationship with them. However, it is important to remember that money can cause strain in your relationship. You would not want to risk a close relationship even in the worst case.
James Somerhalder is a writer and passionate blogger who loves to write for finance related blogs. He is well qualified with master degree in finance that helps him to make his financial planning properly. Apart from blogging he loves music, gardening and writing.