Commercial banks, savings and loans companies, credit unions and investment companies are the most common type of loaning companies that can offer business loans, although most times these loans are secured. This means that whenever applying for a business loan you will have to offer either a property or belonging to guarantee as collateral for your repayment.
In general all types of loans are risky, especially if you are launching a new business, so you must consider your options carefully before you do ask for a loan. Unsecured loans offer smaller amounts of money for those who request them and you may usually expect to receive no more than 100,000 in addition you will have to prove a good credit history in order to get approval. Sometimes commercial banks also request the guarantee of a co-signer.
Minorities and women have a larger selection of institutions they can to for a business loan and these are organizations such as the Women Entrepreneurship or the Womens Business Ownership. Minority business loan programs are also available. Many businesses and government agencies or organizations allocate special funds to lend to minority business owners. The MBDA or Minority Business Development Agency is a federally funded agency that specializes in fostering minority-owned businesses. This agency can help minorities with personalized assistance and financial planning to secure adequate financing for business ventures.
There is also what is called an Angel Investor that can offer business loans, which is a professional investor who only invests in companies. This type of source can be a good idea for those businesses that are just starting as many times these angel investors are prepared to risk on new emerging companies while banks will not. The only setback with angel investors is that they will be involved in your business and you may not want these third parties involved in your business.
Venture Capitalists are in the business of loaning money to businesses that offer strict investment criteria and specialize in very specific high-growth industries. In return for capital, venture capitalists will acquire stock in the company. Venture capitalists generally look for businesses that can show profit within three to five years, and then they move on. However, during those three to five years, venture capitalists play a very active role in shaping the business. This often leads to a lack of control by the business owner.
Both angel investors and venture capitalists can be found by asking your business lawyer or accountant. Or you can conduct your own search via the Internet.
Families and friends are often a source for business loans as are business partners or potential customers. Whomever you ask to lend you the money you need for your business, having a good business plan or blueprint is the key. No investor, large or small, wants to invest in a business that lacks a good foundation, and that always starts with an excellent blueprint.