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subject: The Challenges Facing Small Business Financing [print this page]


One of the biggest challenges for small businesses is securing financing. After a tough recession, many small business owners might be surprised that banks are actually lending and they're helping small businesses grow.

In 2011, Chase Business Banking reports that it loaned $17 billion to businesses with less than $20 million in revenue. That's up from $11 billion from a year ago. While banks are still cautious, there is money available to help your small business grow and flourish.

"There is money out there and we are doing a lot of deals, but it is still a pretty fragile market," Kevin Ellis, vice president of small-business lending at Atlantic Coast Bank, said in a statement.

Yet still 54 percent of small business owners say credit availability is a top concern, according to a recent Bank of America report. Of those surveyed, 75 percent said effectiveness of U.S. government leaders is their top concern, followed by commodity prices (gas and oil) at 73 percent, recovery of consumer spending at 71 percent and health care costs at 70 percent.

To dampen those concerns, small business owners can take steps to avoid being rejected for financing by banks.

One of the most important keys to winning that loan is being prepared. Make sure to not only have all financial statements for your business prepared and organized, but also bring your personal credit history with you. Most small business owners don't have have a long operational history, so banks assume they operate their business the same way they manage their personal finances.

Just as you would update a rsum when applying for jobs, make sure your business plan is completely updated when going for funding. Proving that your finances are in order is only one component of earning financing -- banks also want to know how you plan to make your business successful and ultimately pay back your loan.

Find a small-business friendly bank. There's a bank on every corner across America, so which one is the best for small businesses? The best banks are the ones that you already manage your personal finances at because you know the employees and its a comfortable atmosphere. But if you don't have a dedicated bank, or are new to an area, there are tools out there to help you find the best bank.One of the newer tools is "Banking Grades," a proprietary online tool that grades every bank on its commitment to business lending. It uses public data from the Federal Deposit Insurance Corporation to compare the amount of a bank's deposits to the amount of loans that bank has made to small businesses. The loans it tracks are less than $1 million. In order for a bank to receive an "A" rating, it needs to utilize 25 percent or more of its domestic deposits to make small business loans.

by: John V




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