Are you a small business owner in need of financing for your small business? Worried about finding financing in the credit crunch? Getting a loan for your business will require careful planning.

As a small business owner you should first determine your financing needs, including how much money you need and how long you will need to pay off your debt (s).  You should also determine the type of loan you need (line of credit, term loan, car lease, credit cards, etc.), as well as the type of lender you can approach for a loan.

Depending on the stage of development of your business, you should shop around for different financing options. Experts identify four stages of development in small businesses:

• In the first stage, businesses are considered start-ups.
• In stage two, a business has a business plan and product samples but little revenue.
• In stage three, businesses have full business plans in place.
• In the final stage, businesses have been in operation for some time and have documented revenues and expenses.

Financing Alternatives for Businesses in Stages One or Two

For businesses in stages one or two, or those in stages three or four with limited or damaged credit histories, small business loans from alternative sources, such as microlenders, may prove to be the most available source of credit. "For us, credit history and length of time in business are not the only things that we consider in evaluating loan applications," says a loan consultant from ACCION USA, a leading microlender. "We also look at the character of an applicant."  

Financing Alternatives for Businesses in Stages Three or Four

For business owners in stages three and four that have strong credit histories, bank financing or a traditional loan will be the most affordable option. Lenders suggest that business owners first submit an application to a bank with which he/she has an established relationship or ask an experienced accountant or lawyer to contact a bank on your behalf to present a proposal.

Given the current credit crunch, even those applicants who have businesses in more developed stages may be denied traditional bank loans, making microlenders, credit unions and venture capital firms a more attractive and likely source of financing.  

A Note on Credit Cards

Credit cards are also a very common source of capital for all stages of businesses. Banks are encouraging applicants who have been denied traditional credit to instead use small business credit cards. You should always use credit cards with caution, as interest rates are typically higher than term loans and hidden fees are common.

The links below provide listings of different sources of financing:

Microlenders:

ACCION USA
Association_for_Enterprise_Opportunity
Microfinance Gateway

Credit Unions:

National_Association_of_Federal_Credit_Unions
National Credit Union Administration

Venture Capital Firms:

vFinance,Inc.
The_Venture_Capital_Marketplace

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