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Small Business Loans

Small Business Loan Guide Step 1: The Where and What of Small Business Loans

    Small business loans can boost your business. If the money is used correctly, small business loans can greatly improve your chance of prospering. However, the process of obtaining small business loans can be complicated, time consuming and tedious. This article will help make that process easier by providing information about the types of small business loans and where you can find loans for your small business.

Types of Small Business Loans

    There are several types of small business loans available, and each one is designed to fit a certain type of business need, whether it is to expand to a new location, buy new equipment or buffer your cash flow in expectation of a slow season. The type of loan you will want depends on how you will be spending the money (Basic Books).

Short-term Loans: Short-term loans are usually repaid within one year and are designed to provide you with a little extra cash flow until you are able to make more sales or collect on the debt owed you by customers ("BBBTips(tm) on Business Credit."). Common types of short-term loans include working capital loans and accounts receivable loans (Basic Books).

Intermediate-term Loans: Intermediate-term loans are commonly used to start a business, buy large equipment or cover the cost of a large, one-time expenditure ("BBBTips(tm) on Business Credit"). They are usually repaid over a period of one to three years ("Applying for Business Credit?").

Long-term Loans: Long-term loans can have a maturity period of up to 10 years and are used to cover very large business expenses such as paying for real estate, construction, vehicles and furnishings (Basic Books). Payments in long-term small business loans will most likely be made monthly or quarterly ("BBBTips(tm) on Business Credit").

Credit Line: A line of credit is a very flexible financial solution that allows you to borrow money when you need it up to a set limit without having to go through the application process each time ("BBBTips(tm) on Business Credit"). It is often used to help with slow seasonal periods or to capitalize on unexpected opportunities.

Who Lends to Small Businesses?

    There are many sources that offer loans and credit to small businesses. They all do not offer the same types of loans or credit; therefore, you should explore each option to find the one that is right for you. By weighing the risks and benefits of each type of lender, you can determine the safest, most useful source of funding for your small business.

Friends and family are potential sources of funding ( If they are willing to loan you money, formalize the agreement in writing to protect your business and their investment ("BBBTips(tm) on Business Credit"). Creating a repayment schedule that is signed by both parties can help you avoid causing unnecessary tension in your relationships.

Banks and credit unions are the most common sources for small business loans ( They offer a wide variety of loans and credit solutions such as term loans, lines of credit, SBA guaranteed loans, mortgages and credit cards ("Applying for Business Credit?").

Other financial service institutions also offer loans and credit to small businesses. Look into savings and loan associations, finance companies, insurance companies and mortgage companies ("BBBTips(tm) on Business Credit"). They may have financing options that fit your situation.

State and local governments often have programs that offer small business loans ( They encourage small businesses to grow and expand because it helps the local economy, which improves the community.

Private foundations sometimes offer grants that you or your business may qualify for. Check with your regional or state economic development offices or search your public library's reference section for foundations that relate to your business ("BBBTips(tm) on Business Credit"). Both economic development offices and reference records can help you locate reputable grants and tell you how to apply.

    If you are unsuccessful obtaining funds from one source, don't be discouraged. There are many avenues to pursue for small business loans.

The Rest of Our Small Business Loan Guide:


Basic Books. The Ultimate Small Business Guide: A Resource for Startups and Growing Businesses. (Massachusetts: Bloomsbury Publishing Plc., 2004), 90-95.

Better Business Bureau. "Applying for Business Credit?" (accessed July 27, 2006).

Better Business Bureau. "BBBTips(tm) on Business Credit." (accessed July 27, 2006).

United States Small Business Administration. "Financing Basics." (accessed July 27, 2006).