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Small Business Loan Basics

Jun 28, 2008
Many people who wish to start their own business need an injection of financial capital at the beginning of a business; the main source of funding for entrepreneurs is business loans. Contrary to the belief that bankers actually look for reasons to turn down prospective clients in need of a loan, they are in the business to lend money.

The ideal option is to run your business for a few years, even just out of your home, and turn a good profit before approaching a bank for a loan. Most asset based loans are collateral against other accounts receivable, inventory, or equipment. Accounts receivable is the most favored of the three because it can be converted into cash quickly. You should know that most lenders have their doubts when it comes to lending money to a first time business owner. You're considered a high business risk at this point, and you should go in to your loan negotiations armed with a few advantages.

If you need the cash before you can begin at all, then chances are you will need to offer some type of collateral. The primary role of bank in the small business lending area is funding growth. They simply don't want to lose out on the loan, and so you'll have to find some way to back yourself up. An example of this would be to finance the expansion of small business with a proven track record.

Most banks can offer a wide variety of loan packages designed to finance expansion of an already existing small business. Depending on the size of the loan, you may require some pretty hard assets for collateral. The lender is not interested in whether or not your business will make money, aside from the extent that will allow you to pay them back on time.

Backing up your loan with assets, provided you have enough confidence in your financial situation to ensure you are not going to lose your collateral. As the line of credit is used, the credit line is reduced and when payments are made the line is replenished.

One major advantage of a line of credit is that no interest is accrued unless the funds are actually used. If you don't have enough assets to stand in for your loan, another option is to find a cosigner. Chances are you won't get as much cash as you would if you had the assets.
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John is a small businessman for small business cash advance & cash advance for small business visit: visaloancenter.com
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