Fundraising Resources SBA Infographic

The purpose of this info-graphic is to help outline the steps involved in obtaining a small business loan. It covers the basic steps that we believe are important when thinking about starting a business. It focuses heavily on a Small Business Administration backed loan as they have the best rates and longest terms. Both yield lower, more manageable, monthly payments.

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First and foremost, it is important to know for which type of loan you are applying. For simplicity, we lump lines of credit in with other loans. While not technically a small business loan, the application process is similar, so it is applicable to treat it as such in the info-graphic.

Loan Types

Lines of credit, are akin to credit cards, they allow you to borrow up to a specific amount, and allows for a longer repayment, as long as you pay your minimum monthly balance. A working capital small business loan helps with offsetting the cost of operating your business. A capital loan is generally used to purchase equipment, real estate, etc.

SBA benefits

No matter which loan you are seeking. A Small Business Administration (SBA) loan will likely be your best choice. In an SBA loan, the government plays the role of a co-signer. It guarantees up to 60% of the loan’s value in case of a default. This greatly reduces the bank’s risk, and therefore, they are willing to loan you the money at a lower rate and for a longer period of time.

Other Options

Getting an SBA backed loan isn’t a guarantee. An SBA loan requires you to have solid credit, generally around 700. This credit rating includes all owners who have more than a 20% stake in your small business. You also have to be in business for a period of time, typically 2 years.

If you need a loan to start your small business, then you will have to look to other types of financing, typically a commercial loan. These loans have higher rates and require payback in a shorter period usually between 3 and 5 years. Finally, the type of lender willing to work with you is a function of the overall creditworthiness of your owners. Large commercial banks, usually will not work with you if you have a personal credit score of less than 700.