Small business loans for small business owners

All Americans dream of owning their own business, and while most of us will never be corporate giants, many of us can more easily achieve the goal of owning our own small business. It will undoubtedly take a dedication of energy and a commitment of many hours to make this dream a reality, but what most of us don’t realize is that it will also require a small business loan. We may need some start-up funds to open the doors of our new hardware or barber shop or we may need a small business loan to keep our garden center running through the long winter season.

Whatever the reasons for our small business loan, there are certain requirements that any bank or financial institution will ask us to meet before they will pay us back any of the money we have deposited with them over the years. Those requirements can be summed up as being eligible and solvent in the eyes of banks and financial institutions. Once we can do that, we may be eligible for a number of forms of small business loans to be successful entrepreneurs.

The federal government’s Small Business Administration is a source of funds for small business loans. They make available guaranteed amounts of money for banks to provide to small businesses that meet the criteria listed above. One of the most common small business loans is called a 7(a) loan. This refers to section 7(a) of the Small Business Act and authorizes the agency to provide a number of financial assistance options to small business owners. Banks and other commercial lending institutions can access these funds to provide to eligible small businesses, and while the bank lends the money, the Small Business Administration guarantees repayment if the lender defaults on the loan.

To be eligible for a small business loan, the business must be able to show that it has the ability to repay the money borrowed. That means that a company must be able to show the bank proof of income and customers in sufficient amounts so that they can no longer continue to operate, but also to repay the borrowed money at the same time. Once this information is presented to the bank, they can make a judgment call on the eligibility of the small business loan application.

The second criterion, being solvent, is a bit more complex and involves an investigation by the bank of the company and its directors to see if they have a proven track record of paying their bills in the past. One document that may be requested is called a “Personal History Statement” from each owner or operator of the business to verify this information.