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How a small business loan can help your business

Small businesses have unique financial requirements; fortunately, there are a variety of loans designed specifically to meet these needs. Small business loans are offered by financial institutions, online lenders and by government institutions, such as the United States Small Business Administration (SBA).

These financial programs have been developed to help established small businesses expand and new ventures start up strong. The following information will help you understand the nature and application process for a small business loan.

Although it’s possible to find a small business loan from an online lender, receiving funding from your local financial institution is likely to be your best option.

“The best place to get a small-business loan is still a [financial institution]...typically offer the lowest interest rates and many have established reputations as trustworthy lenders,” according to Dan Weil from Bankrate.

Local financial institutions are more likely than an online lender to understand the community in which your business works and be able to form a close relationship with you. This relationship is one of the many reasons why funding from a local [financial institution] can be so profitable for small businesses. Weil describes that “the key to success with [financial institutions] today is to show past profitability, and to describe a well thought-out plan for future profits.”

Careful preparation before you meet with your financial institution is critical for being approved for the sum you need at a good rate.

"If you aren't making a profit now, you must be able to tell the [financial institution] how you will change that in the short term, or you really won't be able to get a loan," stated small business consultant George Cloutier in an article on

Many small business owners who want to make small expansions or upgrades to their businesses end up postponing because they don’t realize that small business loans are not just intended for large sums of money. So, if you need to buy a few computers or vehicles to expand your business, it may be the perfect time to apply for a small business loan. Generally, the smaller the loan amount, the easier it is to be approved.

The United States Small Business Administration (SBA) works with financial institutions around the country to provide small businesses with loans. Utilizing the search tools provided by the SBA can help you find financial institutions in your area that are well-versed and interested in providing small business loans.

Weil notes that financial institutions providing SBA loans emphasize profitability forecasts and business plans when making loan decisions. So, if you wish to apply for an SBA loan, be sure that you have your business plan firmly established.

There are several loan types offered by the SBA. The seven (a) loan program provides funding for businesses with special requirements, and is the SBA’s most common loan program.

According to the SBA, “The key factors of eligibility are based on what the business does to receive its income, the character of its ownership and where the business operates.”

To be eligible, your business must:

The SBA also offers microloans and loans specifically designed for real estate and equipment, so be sure to examine all avenues before making a decision. If you would like to begin your search for the perfect small business loan, the SBA has put together an online search tool that you can find at or you can contact us today.

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