Getting Small Business Loans with No Collateral in this Recession
November 26th, 2009 | 
Author: The global financial crisis has made it quite difficult for companies, especially small businesses, to get business loans. Ironically, it is also in this situation that smaller companies often need additional capital infusion to boost income. You may need to get small business loans to acquire a better business location, construct a new building, renovate your premises, pay for new equipment, fixtures or furniture or increase inventory and working capital.
Most Small Business Loans Require Collateral
To get business loans, even small business loans, is a major challenge.
First you need to identify which among the many types of small business loans you need. Small business loans ranging from $5,000.00 to $35,000.00 are called micro loans. For larger needs, such as for the acquisition of land, buildings and other major fixed assets, development financing is what you should find. There are also import export loans as well as franchise financing. Do your research to find out if you are qualified for small business loans guaranteed by the U.S. Small Business Administration or SBA.
Any of these small business loans will require extensive preparations and paperwork. As a small business owner, you will need to prove your credit worthiness through a personal credit history report. Lenders will also require a business plan which includes your credentials as the business owner, your company financial statements, business assets and an analysis of your market. All of these should be packaged in a professional loan proposal which presents how the loaned amount will be used to strengthen the business and how you intend to repay the loan. Most of all, you need to present your loan collateral – the assets you will put up to secure the loan.
Quick and Easy Small Business Loans with No Collateral
For smaller acquisitions or day to day business needs, there is a way for entrepreneurs to get small business loans easily and quickly with no collateral. This is through merchant services.
Merchant services provide credit card services to businesses. This enables them to accept and process payments through credit cards or debit cards either through face to face purchases, online transactions, or even by phone or fax. Merchant service providers supply terminal equipment for card swiping, as well as the necessary software and high speed IP solutions.
Most businesses need credit card services since consumers routinely pay for goods and services through credit cards and debit cards these days. If your business has not taken this step yet, you may have been missing out on more than half of your income potential.
These same merchant services also provide the solution for your small business loans. Collateral-free loans can be availed of through their cash advances, with the loan amount computation based on the monthly credit card revenue your business generates. Credit card sales requirements may be as low as $3,000.00 a month. You will not be asked for collateral since your future revenue is your collateral.
The best types of merchant cash advances do not require fixed monthly payments nor do they impose deadlines on loan payment. A certain percentage is instead deducted automatically from your credit card revenue each month to go towards loan payment. This way, you never have to worry about loan amortization.
Once your cash advance has been fully paid, you may apply for another one. It is like having a revolving credit line. Make sure that you compare the terms of several merchant service providers, though, and read the fine print on contracts. There are so many merchant service providers competing for your business that you’ll surely find one that fits your needs.
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What can you tell me about small business loans?I'd like to get a small business loan to cover start-up costs and to give me working capital for two years. I'd also like at least 40 acres of land for the business to use. Should I bundle the loan for the business with the loan for the land or should I do each loan seperately?
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You stand a greater chance of getting a government-guaranteed loan through the Small Business Administration http://www.sba.gov/financing than a government grant. Read the SBA Financing page to learn about criteria needed for borrowing
It is hard to find grants to start a business. Unlike the myths that some perpetuate, federal government and even private foundations hardly give grant money for a for-profit business. And yes, grants mean PAPERWORK – lots and lots of it, that is why a cottage industry of grant writers was born.
Nonetheless, you can go to the Catalog of Federal Domestic Assistance (CFDA) http://www.cfda.gov and Grants.gov http://www.grants.gov – these are two sites created by the federal government to provide transparency and information on grants. Browse through the listings and see if you can find any grant that would support a for-profit venture.
Even if you buy books on "how to get grants" or list that supposedly has information on grants — all of them are mere rehash of what CFDA has, albeit packaged differently. But still the info is the same – hardly any grants for starting a for profit business.
Even SBA does NOT give out grants. From the SBA website http://www.sba.gov/expanding/grants.html
"The U.S. Small Business Administration does not offer grants to start or expand small businesses, although it does offer a wide variety of loan programs. (See http://www.sba.gov/financing for more information) While SBA does offer some grant programs, these are generally designed to expand and enhance organizations that provide small business management, technical, or financial assistance. These grants generally support non-profit organizations, intermediary lending institutions, and state and local governments."
Here is a listing of federal grants for small businesses. See if there is any available for individuals for starting a business — THERE'S NONE.
http://12.46.245.173/pls/portal30/CATALOG.BROWSE_BENEF_RPT.show
Most of the federal grants are given to specific target groups with specific requirements (e.g. minority business owners involved in transportation related contracts emanating from DOT – Grant#20.905 Disadvantaged Business Enterprises Short Term Lending Program
Grants are also often given to non profit groups or organizations involved in training or other similar activities (grant 59.043 Women's Business Ownership Assistance that are given to those who will create women's business center that will train women entrepreneurs
I suggest you read the following books to get ideas of how to finance your business:
Financing Your Small Business http://www.amazon.com/exec/obidos/ASIN/1572484500/powerhomebizguid
Small Business Financing: How and Where To Get It http://www.amazon.com/exec/obidos/ASIN/0808007386/powerhomebizguid
Financing the Small Business: A Complete Guide to Obtaining Bank Loans and All Other Types of Financing http://www.amazon.com/exec/obidos/ASIN/1580626815/powerhomebizguid
The SBA Loan Book http://www.amazon.com/exec/obidos/ASIN/158062202X/powerhomebizguid
Angel Capital : How to Raise Early-Stage Private Equity Financing http://www.amazon.com/exec/obidos/ASIN/0471690635/powerhomebizguid
Financing Your Small Business (Barron's Business Library Series) http://www.amazon.com/exec/obidos/ASIN/0764124897/powerhomebizguid
It was Mohammed Younus, the economist who put the word "microloan" on the map with the Grameen Bank in his native land of Bangladesh.
Here is his profile on the BBC website:
http://news.bbc.co.uk/2/hi/south_asia/6047234.stm
Its sounds pretty complicated so Ill just post the link to the site i found
http://pittsburgh.bizjournals.com/pittsburgh/stories/2009/02/23/story11.html
hope that helps
Its nice to have a respectful exchange on this forum for a change
since u do not say what or where u are planning to do this it is a guess.
land loans are often separate from business loans.
working capital for 2yrs is a long shoot.
I Think it would be easier to get a personal loan and use the money for your business. A Business loan is not easy to get if you have little experience or starting a new business.
The reason being the new businesses often fail. It's might be easier to get a personal loan.
Even if you apply for a business loan you will need to personally guarantee the loan, therefore why go through all the red tape of applying for a business loan?
Another benefit to taking out a personal loan is that when your business makes a profit you can repay the loan to yourself tax free. Rather than than taking that money as profit from the business.
Hope this helps
It will depend on your personal credit even though it is for a business. The bank will evaluate the ability the company is able to pay back the loan and that is how they determine the amount to loan you. In this economic climate, you will not be able to get a loan without significant financial commitment from you such as cash and collateral.
Dual citizenship has nothing to do with getting a business loan.
The rate would depend on a lot of factors. But because this is a made up business, let's say that everything the bank looks at (credit reports, financial statements, collateral, etc) is perfect. If the loan is secured by real estate the rate most likely will be fixed at about 7.25% with monthly principal and interest payments based on an amortization period up to 25 years. If the loan is secured by the company's assets, the rate would be closer to 7.75% and probably a variable rate based on the 5 or 10 year Treasury Bill plus a spread added to it. Monthly payments would still be principal and interest, but the term and the amortization period would be shorter than above – closer to 5 years.
This may not be exactly what you are looking for, but, I think you are taking over an established business, as in, someone in your family or all of you are taking over legal ownership of the restaurant…you could go to a regular bank in your area and get a small business loan using your restaurant as collateral. With solid cash flow statements, I can't see why you would be turned down. Local banks are always looking to partner with local businesses because it makes them look good and builds their credibility in the community.
So, before you get adventurous, start by looking to see which banks are listed in your local chamber of commerce directory. Those folks would be the ones looking to support local businesses. When you get a local banking contact, invite that person to your restaurant for lunch…or join the chamber of commerce and host a chamber event, like a happy hour if your serve drinks or offer chamber members coupons.
In my opinion, when it comes to banking, relationship building in your local business community is more effective than fishing around for companies offering programs who don't really understand the true value of your business.
There is a non-profit organization called Prison Entrepreneurship Program which is described as "a Houston-based nonprofit organization that leverages the skills of senior business executives to constructively redirect these talents and equip inmates and former inmates with entrepreneurial training—enabling them to productively re-enter society."
http://prisonentrepreneurship.org/
As for small business loans, felons typically find it hard to get one, even SBA. SBA adopts a "cautious" approach to lending to felons and oftentimes bases its decision on how serious the crime committed was and whether there is strong likelihood that the offense will be repeated again.
I'm not sure if this is the same person you saw on the Daily Show, however I think it's Grameen Bank, whose founder won the Nobel Peace Price. Attached to the Bank is the Grameen Foundation. The bank makes microloans to deserving persons to start or fund small businesses in developing countries. Check out the website of the Foundation to donate much needed funds:
Many of the National banks and some community banks have small business loan programs. When getting a loan here are things the bank looks for:
A business plan detailing the product/service,, customer,location, and financial analysis.
Your business experience and how well you understand this industry. Can you make this business work. Do you have personnel on your staff to supplement your lack of skills.
Credit history which demonstrates your ability to handle credit. Your personal credit score needs to be well above average.
What collateral do you have and how can you guarantee the loan in case of problems.
Terms – How much, How long and For what? Can the what be reposed in case of problems?
Your equity. They like to see you putting up more than 25% of what you need.
You could try the SBA Microloan Program where you can get up to $35K. http://www.sba.gov/services/financialassistance/basics/sbarole/LOANPROG_MICRO.html .
SBA.gov is a great source…..what out for scam artists posing as sanctioed govyt lenders though. Also…it takes time, plan on more time than you'd imagine
Business loans are a lot more complicated then mortgages. Take a business course at your local community college before you try this.
I would say you that many banks would only lead you around £10,000 pounds or $14,000 to start your business and you will need:
-Strong business plan
-Produce projected profits
-Have a good idea, product or service
I would consider getting an enterpruneur to finance the business.
Dragons Den -BBC1
Anglesden.com
There are SBA lenders (banks) that deal with small business loans. You will need to put up some collateral, generally your house or other personal asset.
Interest rates vary. Go in an talk with an SBA officer, they can explain it all to you.
If in the USA, check out the Small Business Administration, they can be very helpful on a new business start up.
You might want to try a credit union. I don't think that there is a best bank for loans it has to do with credit.
If you are unable to secure a small business loan and have no collateral, 40billion.com is a good option for business owners seeking financing and resources. Small businesses and startup entrepreneurs raise money through personal connections online (a.k.a person to person, peer to peer, social lending). This elevates access to funding, increases transparency, reduces costs, and lowers risk.
Entrepreneurs connect with their social networks (friends, family, friends of family, community members, colleagues, alumni and others) to raise up to $99,000 in funding by requesting loans and gift contributions. Funders can get product discounts and freebies, as well as the ability to track how the funding is spent.
Visit http://www.40billion.com for more info about people funding businesses.
Small business loans is a good start up for establishing your own business, however, credit or debit cards will pull you down in the end? Ask for more pre-evaluation of your business plans and how much of it are you going to pull your strings.