Although we are all living in a global economy that is a lot different to what it may have been a few short years ago, there is always going to be room in the market for new and small business. If we look at the statistics in virtually every industrialized nation in the world, small and medium sized businesses are what make up the back bone of the nations GDP. As we all know though, the times of walking into a bank or lending institution with a briefcase containing a minimal business plan, and a head full of ideas in order to get a first time business loan, are virtually gone.
Due to the credit crunch and the world recession, it is now much hared to gain the initial funding that is needed by a lot of small business owners, or those without security, who may be venturing into their very first enterprise. Depending on where you are and who you approach, small business loans can be a straightforward process, if you are in the position of having adequate collateral to support the loan. Most however are no longer in this position. If you are one of the reasonably lucky ones who have security in the form of property assets, or investments, then it really can be a simple process to acquire your first time business loan.
Of course there are always going to be conditions and criteria that any lender is going to focus on. This will include (a) your security level and the amount of the loan application, (b) your ability to repay the loan should you not succeed in business and (c) all other commitments you might have and the priority of those in relation to your new loan, should your application be successful. The bottom line is that any lender, although they in the business of assuming risk, is going to want to be able to justify your application to his or her superiors, to the point of having a watertight means of collection, should the need arise.
Another fundamental requirement from all premium lenders will be that through your credit history they can ascertain your willingness and ability to honor any commitments you may have had in the past. Obviously there is a little more leniency these days with this criteria, as more and more people head for the bankruptcy courts, but only if every other condition is met, and acceptable. Your credit rating will always determine how seriously a lender will consider your application for a first time business loan.
Normally a business loan will be repaid over a ten year period, at a fairly high interest rate in comparison to a mortgage, and because of this interest a lot of people will actually look to favorably refinance their home or other property, to free up the capital they need to inject into the startup. This way they can borrow the same amount of money, extend the term of their personal mortgage and benefit from a reduced repayment rate, as opposed to the higher rates of a first time business loan.
Other people move in a different direction and one that is not recommended, but they take out an extension of their credit card, paying the maximum amount of interest, and never really paying down the loan. This is because credit cards are a revolving credit facility and not structured in the same manner as a first time business loan, or a mortgage. Each time you make a payment on the credit card, that same amount of capital (credit) is available for you to spend again. The best advice when seeking funding for a new business is to always consult with your accountant prior to making a decision as to hoe much you can or want to borrow.