Starting a small business needs financial support. There are certain financial organizations that provide small business financing. The financial assistance that is provided by these institutions are of several types. These are the short term loans, the term money and the equity capital.
The short term small business financing is offered for very short time and it is meant to provide assistance for the short term needs. These loans are generally returned within two months. The term loans are divided in two parts. The first part of the money should be returned within five years. The remaining part of the loan is provided for a longer period. The equity capital is related to the investment of the interested people in the company.
The small business financing depends on a number of factors. these are as follows:
Amount of money needed
Lender evaluation standards
The loan application
Loan restrictions and limitations
The factor of credit worthiness is very important for small business financing. Any financial organization that are in the business of providing finances, are interested in this factor very much. The credit worthiness of an small business loan applicant includes a lot of things. These are the experience and plans of the applicant regarding the business. At the same time, the amount and use of that money is also very important. Another important factor is the repayment plan of the loan.
Collateral is the another matter of concern for the small business financing institutions. The value of the collateral is related directly to the loan and it influences the approval of the loan amount. The collateral is the security of the loan and thus the loan providers always make sure that the collateral covers the amount and in case the borrower defaults, the total loan amount can be recovered by selling the collateral. Sometimes, several other documents and guarantors are also needed with the collateral.
The small business financing is also related to several limitations imposed by the financing institutions. These limitations are imposed on the small business management process of the applicant. The banks or other small business loan providers are always concerned with recovering the money and also to help the borrower to make good profit from the business. Because of this, the restrictions are added with the small business financing.
The application form for small business financing is also very important because the evaluation applicant is related to the application form. So one should be careful while filling up the application form.
Last Updated on : 29th July 2013