Financing Small buisiness plan :

A small scale business plan's first hurdle is arranging funds for your enterprise. Without funding a small scale business cannot take off. To start with the first port of call which an entrepreneur can think of is the nearest bank. There is every possibility that you have a bank account there. But despite a relationship built over many years you will at once notice that when it comes to loaning money banks become old fashioned and stingy.

Banks normally play safe and do not speculate. Therefore they normally give privileged treatment in terms of loans to established business enterprises. Small or emerging businesses or companies do not get favored treatment. In fact banks are quite circumspect in lending money to fledgling companies or entrepreneurs. Banks have to be prudent with the money of their depositors to whom they have an obligation hence their preference to established business houses.

As an entrepreneur in case you have decided to take the plunge and start your own business, than the next step is the business loan application process. This by itself may give you food for thought. But if you consider investing in a franchise, then you will need finance immediately.

Having taken the decision its important for you to spare some time and carry out a small appraisal as to which Banks/Lending Institutions can offer you the best possible terms on a franchise business loan. Your aim should be to catalogue your immediate requirements keeping in mind some basic parameters. You must some basic rules and see that the loan fits tem. They are a.) Low Interest rate. This is important as even 0.5% point could make a big difference over a period of time; b.) Has minimum or zero file charges/fees; and c.) Matures over a greater period of time. This will help you get your business going.

Keeping the above in mind you should start negotiating with the banks or lending institutions that you are familiar with you as a customer or banks where you may have an account or relationship.

Before meeting the r agents/representatives of the lending institutions you must have your fact ready. In other

words you need to have a solid business plan drawn up. You also need to be familiar with the business plan and able to answer all questions or doubts the agent /representative has. Another factor that you cannot miss out is that you have no outstanding debts that affect you financial credibility. However despite the best of efforts in case your loan application is rejected due to any reason you will need to think of an alternative .In such cases you can contact the Small Business Administration (SBA).

The U.S. Small Business Administration (SBA) was created in 1953 as an independent agency of the federal government. Its aim was to aid, counsel, assist and protect the interests of small business concerns. The SBA recognized that small businesses were critical for the United States economy hence the US Government has given it due importance. SBA helps Americans start, build and grow businesses. They have an extensive network spread all over the United States.

The SBA has many loan programs to help set up small businesses. (However, it must be clarified that the SBA does not disburse any money on its own. It only acts as a guarantor of loans given by other institutions). The SBA helps entrepreneurs get their loans by providing a guaranty, or a formal assurance to the bank or other lending institution that the debt will be covered should the entrepreneur default in payment of the loan.

SBA works along with many banks:

Small business owners thus can get business loans from these partner Banks, which are associated with the SBA. For this its important for them to be able to present a feasible business plan that is viable in all aspects. Banks are more likely to give modest sized loans to entrepreneurs than venture capitalists that are looking to disburse loans on a much larger scale.

Before approaching a bank, you need to have your business plan ready and all other documents the bank me need. You also need to have your latest financial statements as well as a repayment plan. Lastly you may have to arrange for collateral.

Collateral may include any of the following singly or in a combination like Hard goods like equipment, Real estate or property, stocks or bonds and personal assets as well as guarantees.

You will also have to keep data ready for the bank as to how you plan to make your own investment in your business. Your chance for getting a loan improves greatly if you can show to the bank that you are investing a fair percentage of the start up capital into the business.

In order to improve your chances of receiving approval on a business loan from a bank you will have need to keep the following information available and ready for the bank to examine.

1) How this business will operate and how it will make a profit

2) How much capital will be needed for your business

3) How will you plan to repay the loan

4) What period you envisage for repayment of the entire loan

5) Whether you are willing to take a significant financial risk in the business by investing your own money.

You may also be eligible to seek loans under SBA's Loan Guarantee Plan or Immediate Participation Plan. If you qualify for one of these loan types, then the SBA guarantees the loan given by the private lender. In such cases the banks are more likely to sanction you a loan because the federal guarantee reduces their risk.

If you later default in payment of your loan, the bank can expect to recover up to 75 to 80 percent of the outstanding loan principal from the SBA. This guarantee encourages lenders to give credit.

Before you apply for a loan have someone with knowledge examine your plans. Once the plan is viable you are ready to apply for a loan. You can get a lot of information from the SBA web site at www.sba.gov.

Once you apply for a loan the SBA will investigate and examine you just like a commercial bank before sanctioning a loan. Once again, make sure your personal finances are in order, and you are ready to answer all questions. The interviewers will most likely act as an inquisitor and question you in depth. So be ready to answer questions that should show you in positive light.