The major concern for today's small business owners is access to capital and credit. The SBA's loan guaranty programs provide a key source of financing for viable small businesses that have real potential, but cannot qualify for loans from traditional sources. SBA guaranties, provided through private lenders and nonprofit lending institutions, give small business owners access to the same kinds of reasonably priced, long-term financing available to large businesses by virtue of their size and economic clout.

Financing programs provided by SBA vary according to a borrower's financial need. SBA loans are made by private lenders and are guaranteed up to 85 percent. There are no grants offered by SBA to start or expand small businesses, only loans. There are three principal players in an SBA guaranteed loan - the small business borrower, the private lender and the SBA. First, the private lender determines whether a borrower's application is acceptable. If it is, the lender forwards the application and its credit analysis to the SBA. After SBA review and approves, the lender makes the loan and disburses the funds to the borrower to make payments to the lender.

Documentation requirements may vary; contact your lender for the information you must supply. Common requirements include the following:

• Purpose of the loan.
• History of the business.
• Financial statements for three years (existing businesses).
• Schedule of term debts (existing businesses).
• Aging of accounts receivable and payable (existing businesses).
• Projected opening-day balance sheet (new businesses). Lease details. Amount of investment in the business by the owner(s). Projections of income, expenses and cash flow. Signed personal financial statements and personal resume(s).

• Good character.
• Management expertise and commitment necessary for success.
• Sufficient funds, including the SBA guaranteed loan, to operate the business on a sound financial basis (for new businesses, this includes the resources to meet start-up expenses and the initial operating phase).
• Feasible business plan.
• Adequate equity or investment in the business.
• Sufficient collateral.
• Ability to repay the loan on time from the projected operating cash flow.

When reviewing a loan request, the lender is primarily concerned with repayment. Loan officers judge loan applications based on what is commonly referred to as the five C's of Credit.

1. Character: Lenders will order a copy of your credit report and look at debt repayment trends. They want to know simply if you pay your bills and if you pay them on time. If there are blemishes on your report, explain them.
2. Cash Flow: Lenders will look at historical and projected cash flow statements to determine whether you will be able to repay the loan and still have money to adequately run the business. Include written justification for your projections in your loan proposal.
3. Collateral: Collateral is an asset (something you own) which a lender may claim to satisfy a loan in the event the loan is not repaid according to the required terms. Often the assets purchased with the loan may serve as collateral. If the business does not have enough collateral, the bank will look to personal assets.
4. Capitalization: Capitalization refers to the basic resources of the company including owner's equity, retained earnings, and fixed assets. You do not have to be fully capitalized to qualify for a loan.
5. Conditions: Factors that affect the success of the company yet are external to the business will also be considered by the lender. Examples include government regulation, competition, and industry trends.

One key to a successful business start-up and expansion is your ability to obtain and secure appropriate financing. Raising capital is the most basic of all business activities. But as many new entrepreneurs quickly discover, raising capital may not be easy; in fact it can be a complex and frustrating process. However, if you are informed and have planned effectively, raising money for your business will not be a painful experience. This information summary focuses on ways a small business can raise money and explains how to prepare a loan proposal.

There are several sources to consider when looking for financing. It is important to explore all of your options before making a decision.

• Personal savings: The primary source of capital for most new businesses comes from savings and other forms of personal resources. While credit cards are often used to finance business needs, there may be better options available, even for very small loans.
• Friends and relatives: Many entrepreneurs look to private sources such as friends and family when starting out in a business venture. Often, money is loaned interest free or at a low interest rate, which can be beneficial when getting started.
• Banks and credit unions: The most common source of funding, banks and credit unions, will provide a loan if you can show that your business proposal is sound.
• Venture capital firms: These firms help expanding companies grow in exchange for equity or partial ownership.

It is often said that small business people have a difficult time borrowing money. This is not necessarily true. Banks make money by lending money. However, the inexperience of many small business owners in financial matters often prompts banks to deny loan requests.

Requesting a loan when you are not properly prepared sends a signal to your lender. That message is: High Risk!

To be successful in obtaining a loan, you must be prepared and organized. You must know how much money you need, why you need it and how you will pay it back. You must be able to convince your lender that you are a good credit risk.

Terms of loans may vary from lender to lender, but there are two basic types of loans: short-term and long-term.

Generally, a short-term loan has a maturity of up to one year. These include working-capital loans, accounts-receivable loans and lines of credit.

Long-term loans have maturities greater than one year but usually less that seven years. Real estate and equipment loans may have maturities of up to 25 years. Long-term loans are used for major business expenses such as purchasing real estate and facilities, construction, durable equipment, furniture and fixtures, vehicles, etc.

Approval of you loan request depends on how well you present yourself, your business and your financial needs to a lender. Remember, lenders want to make loans, but they must make loans they know will be repaid. The best way to improve your chances of obtaining a loan is to prepare a written proposal.

A good loan proposal will contain the following key elements:

General Information

• Business name, names of principals, Social Security number for each principal, and the business address.
• Purpose of the loan -exactly what the loan will be used for and why it is needed.
• Amount required - the exact amount you need to achieve your purpose.

Business Description

• History and nature of the business -details of what kind of business it is, its age, number of employees and current business assets.
• Ownership structure -details on your company's legal structur

Management Profile

• Develop a short statement on each principal in your business; provide background, education, experience, skills and accomplishments.

Market Information

• Clearly define your company's products as well as your markets.
• Identify your competition and explain how your business competes in the marketplace.
• Profile your customers and explain how your business can satisfy their needs.

Financial Information

• Financial statements -balance sheets and income statements for the past three years. If you are starting out, provide a projected balance sheet and income statement for three years.
• personal financial statements on yourself and other principal owners of the business.
• Collateral you would pledge as security for the loan.