Working with a bank to obtain a small business loan can be an easy or
difficult process, depending on how prepared you are to meet with the
lender and discuss your business' situation and needs.
One of the
leading causes of business failure is insufficient start-up capital.
Ironically, though, lenders rarely approve loan requests for the
businesses that have the highest need for a small business loan.
Instead, lenders tend to prefer to offer small business loans to those
businesses that have been in operation for two or more years.
According
to All Business, it is estimated that 95 percent of all entrepreneurs
opened their businesses with capital from their own pockets, or from
money they borrowed from relatives, friends, or another person in their
community. Lenders want to see business owners risk their own funds in
the business venture, and often require that the business owner or
owners provide a minimum of 25 percent of the capital needed to start a
business, and at least that much equity in the business if the business
is already in existence. Simply stated, lenders aren't as willing to
take a risk when a business owner doesn't even risk their own money in
the investment. Businesses with a history demonstrating success in
paying their bills for two and a half to three years will have the
easiest time obtaining a small business loan because they've proven
their ability to meet financial obligations.
