Financing Your Business
Going into a bank for a small business loan can be intimidating if you don’t know who to talk to or what to ask for. The good thing is there are organizations ready to help you figure out what you need before you even step into a bank to fill out a loan application. And, there are some organizations called microlenders capable of lending small amounts of money without you having to step into a bank (with good repayment history, you can borrow larger amounts over time). What’s important to know is that there are people out there to help you find the right loan for your business needs.
If you think you’re ready to step into a bank to ask for a loan, you should be prepared to answer the following five questions:
- Character – do you have a strong personal and business credit history
- Capacity – do you have experience related to operating the type of business you’re starting
- Capital – do you have access to money (sometimes banks only lend 80% of total loan amount)
- Cashflow – are your sales projections for the business realistic and achievable
- Collateral – how will you secure the loan (do you own property, cash, retirement accounts, etc.)
These five questions will be asked by all lenders, with each lender weighting the importance of each answer differently and adding to the list it’s own special requirements depending on what type of lender they are.
In general microlenders or microenterprise development organizations (MDOs) offer business development services such as business training, technical assistance, and access to capital and markets. They serve aspiring and established entrepreneurs interested in starting or expanding a business but who need access to capital or training to acquire the skills they need to run a successful business. Often they serve entrepreneurs who do not have access to a business loan from a bank or credit union. Here is a list of microlenders in Seattle and South King County:
Loans under $5,000
Loans between $5,000 and $50,000
Loans greater than $50,000
The following MDOs specialize in lending for:
- JumpStart: Refugees
- WATF: People with disabilities
- ShoreBank: Hispanics, Native Americans, Green Building Loans, Child Care Businesses
- Community Trade and Economic Development: Child Care Center Grants
So, maybe you won’t take a business loan at this time, but you might consider going to a lender when you’re ready to grow your business. If you think this might be the case, you should begin working on building a strong personal and business credit history. If you don’t know the difference between a good and bad credit score, there are resources to help you figure this out.
The following credit repair and financial literacy programs can help:
Learn about building new credit: BECU
Get a free credit report once a year at www.annualcreditreport.com