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How To Raise Money For Your Small Business

by Jerry Glen

One key to a successful business startup or expansion is your ability to 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.  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.

Finding the Money You Need 

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

Borrowing Money 

It is often said that small business people have a difficult time borowing money.  This is necessarily true.  Banks make money by lending money.  However, the inexperience of small business owners in financial matters often prompts many banks to deny loan requests.  To be succesful in obtaining a loan, you must be prepared and organized.  You must know exactly how much money you need, why you need it and how you can pay it back.  You must be able to convince your lender that you are a good credit risk.  Requesting a loan when you are not properly prepared sends a signal to your lender.  That message is ... "High Risk!"

Types of Business Loans 

How to Write a Loan Proposal 

Approval of your 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:

How Your Loan Request Will Be Reviewed 

When reviewing a loan request, the lender is primarily concerned about repayment.  To help determine this ability, many loan officers will order a copy of your business-credit report from a credit reporting agency.  Therefore, you should work with these agencies to help them present an accurate picture of your business.  Using the credit report and the information you have provided, the lending officer will consider the following issues:

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