Small Business Resources — Credit for Small Businesses

Credit for Small Businesses

One thing to keep in mind as you go through the process of launching a new business: you don’t have to go it alone. Government agencies, universities, banks, and other institutions have a stake in seeing you succeed. Thriving small businesses are good for the community and good for the country. They contribute with innovation, jobs, and a spirit of entrepreneurship that gives a flavor and distinction to our environment.

Banks and other lenders have designed products tailored to small businesses.

Among short-term credit options:

  • Business credit cards—No-fee or low-fee cards with competitive interest rates, which help you keep day-to-day business expenses separate from your personal spending.
  • Business money market accounts—FDIC-insured accounts that pay interest on deposits.
  • Business lines-of-credit—Used to purchase inventory, for emergency cash needs or other purchases, you pay interest only on what you borrow, but keep the credit line open to use when needed.

Long-term credit options include:

  • Term loan—A loan with a fixed interest paid back over a specified length of time that can finance the purchase of equipment or other capital goods.
  • Real estate loan—To buy or build your business property and build equity as you go.
  • Small Business Administration loans and lines of credit—These government-backed loans offer longer pay-back terms, higher borrowing limits and may be easier to qualify for than conventional loans. The SBA doesn’t make the loans directly, but it does guarantee loans made to small business by banks and other private institutions. Details are available on the Small Business Administration Web site. Types of SBA loans include:
    SBA 7(a) loans—They include Express Loans, which promise a 36- hour response turnaround; Patriot Express Loans for businesses owned 51 percent or more by members of the military community; Community Express Loans, offering financial and technical help to businesses in underserved communities; an Export Loan program designed to help small businesses develop or expand an exporting business; and a Rural Lender program that backs loans made in rural areas and very small communities.
    CDC/504 loans—Loans with long-terms and fixed rates to help small businesses buy real estate or equipment. To apply, you go through a CDC—a Certified Development Company—which is a private, non-profit corporation set up to contribute to the economic development of their community.
    Microloans—Designed for small businesses and not-for-profit child-care centers, they provide short-term loans up to $35,000 for the purchase of inventory, supplies, furniture, fixtures, machinery, or equipment. These loans are delivered through non-profit organizations.
    Disaster assistance loans—Low-interest loans to homeowners or renters, businesses, and non-profit organizations to repair or replace property that has been damaged or destroyed in a declared disaster.

Good places to start when looking for a small business loan include:

  • Your bank
  • State and local government agencies
  • Non-profits

Other possible sources of financing include:

  • Insurance companies
  • Commercial finance companies
  • Investors—Family members, friends, or venture capitalists who buy a piece of your business, hoping to share in profits or make a profit with the sale of the business.

Applying for a business loan

Before you seek financing, gather your documents—your business plan, balance sheet, profit and loss statement, cash flow statement, tax returns, list of assets, and proposed collateral, credit reports and marketing plan—and use them to pull together an organized, professional-looking loan request that includes:

  • Cover sheet with business name and contact information
  • Executive summary that describes why you want the loan, how much you want to borrow (maximum and minimum amounts), what type of loan you want and for what term, how the money will be used, and how you plan to pay it back.
  • Your business plan
  • An overview of cash flow and collateral
  • Summary of your credit history—Address problems clearly and up front
  • References—Community and business references
  • Sources of repayment
  • Conclusion that states your belief in the proposal

How do I create a business plan?

A business plan is like a roadmap—outlining where your business is going and how it's getting there. Create your plan with this free workbook.

Small Business Plan Workbook (2.1 MB PDF)

This site is for education purposes. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.