Small Business Loans

Guide to Shopping for Small Business Loans Online

How to use the Web to find the right financing for your business
By Daniel Kehrer

	Business Loans Quick Start Sharpen your business plan as a first step toward applying for business loans Start your search by comparison shopping at business loans Web portals There are more sources of small business loans than banks: Try SBICs and even UPS

Money — or the lack thereof — is the missing link in many a grand business plan. Startups often launch with less than they need, and struggle from Day One. And adequate financing is crucial for your business to grow and thrive. The good news is this: The Internet has made the process of finding traditional as well as alternative sources of funding easier than it once was. Funding types and sources fall into a few broad categories — either debt or equity financing from institutional or informal sources.

1. Debt financing is a loan you pay back. Common sources include: family and friends, personal credit cards, home equity lines of credit, commercial bank loans and small business loans backed by the U.S. Small Business Administration (SBA).
2. With equity financing, you give up pieces of your business in return for the cash. The good news is you generally don't have to pay the money back. The bad news is that the people or institutions that put up the money — your investors — now own part of your business.
3. Other funding or cost-sharing options include: Partnerships, joint ventures, alliances and co-branding arrangements.Business incubators don't generally offer cash, but do provide crucial support in the form of free or reduced rent and business services.

Action Steps for Sourcing Small Business Loans Online

The best contacts and resources to help you get it done

Comparison shop online for multiple financing sources There are many sources of small business loans and credit lines. To find the perfect fit and absolute best terms, you can comparison shop among many lenders.

I recommend:  Enter your information at BusinessFinance.com or iBank – both are Web portals that match lenders with small businesses, to find the best fit for your particular needs. Or fill out a business loan request form at BuyerZone and interested lenders will respond with loan quotes.

Shop major small-business loans providers All banks that serve small business offer business loans and commercial lines of credit. Biggies like Wells Fargo offer credit lines that you can easily apply for online, even if you're not already a customer of the bank.

I recommend:  Online offerings at these banks active in serving small business: Wells Fargo, Bank of America, Washington Mutual, Wachovia, Key Bank. Or for strictly Web-based banking, try NetBank. American Express also offers credit lines to $100,000 with a short online application. There's no collateral or minimum balance requirement.

Find venture capital sources online The best way to find venture capital financing is to first locate potential VC backers online.

I recommend:  Visit NVST.com, an Internet hub for the private equity and finance community. You'll want to plug into NVST's Capital Motion program which provides entrepreneurs with access to angel investors, venture firms, corporate venture funds and other private equity investors. Check the listings for venture capital and private equity firms at Business.com.

Check SBA-backed loans and lines of credit The U.S. Small Business Administration (SBA) has numerous loan programs for small business. But the SBA only guarantees small-business loans; it does not lend the money directly. Banks and other private lenders do that.

I recommend:  Lean about different SBA programs and find active SBA lenders.

Don't overlook Small Business Investment Companies (SBICs) SBIC's are a hidden treasure trove of small business financing.

I recommend:  Complete information on the program, including guidelines for entrepreneurs seeking funds and detailed listings of all operating SBICs in the country, is available in the Investment Program section of the SBA Web site. Or locate SBICs under the member listings of the National Association of Small Business Investment Companies (NASBIC). The National Association of Investment Companies (NAIC) is geared toward financing for minority-owned business.

Line up with the financing angels For those wary of a business loan, angel investors can be a good source of financing.

I recommend:  Angel Capital Education Foundation directory of member angel groups is available free. AngelDeals.com matches entrepreneurs with potential angels.

Look to non-traditional sources UPS – a big name in small biz shipping – is also a major small business loan provider under its UPS Capital wing, offering both business loans and lines of credit. Other finance companies specialize in credit based on your credit card receivables.

I recommend:  Check the case histories of how UPS Capital is helping small businesses grow and find out how to apply here. See Business.com's listings of credit-card receivables companies.

Tips & Tactics for Successful Business Loan Application

Helpful advice for making the most of this Guide

• Button down your business plan. A business plan is a 'gotta have' piece in your financing puzzle. The plan should be realistic and cover all the bases. Avoid vague goals and pie-in-the-sky projections. The plan should document why the business needs financing, and how much is needed to reach a specified level of growth and profitability.
• Take a personal, financial stake in your business. If you want others to back you and your ideas, be prepared to ante up yourself. If loans are part of the mix, your personal credit profile should be in tiptop shape.
• Budgets and financial statements tell the tale. If your business is already operational, create some basic financials on how you are doing. Don't worry if you aren't looking completely gorgeous just now. Investors know that if everything were perfect, you wouldn't be looking for money.
• Be prepared. Lenders are likely to ask tough questions, be skeptical of your answers and have little patience for running off at the mouth. Your best step is to be totally prepared and comfortable with your plan.
• Know how much you'll need and how you'll use it. It's critical to estimate how much money you think you will need overall. All good lenders or investors will want to know this, as well as what you plan to do with the money.