small business

3 ways to get a small-business loan

SBA loans

Another way to find a bank loan is through the Small Business Administration, or SBA. The SBA can direct you to banks that offer loans guaranteed by the agency. This way, you'll have the advantage of approaching banks specifically interested in lending to small businesses.

In the fourth quarter of 2009, banks made 14,386 loans guaranteed by the SBA, up 38 percent from a year earlier. The gain stemmed largely from increased guarantees and reduced fees approved by Congress and the White House, says SBA spokesman Mike Stamler.

Such measures were part of the stimulus package and were originally scheduled to expire on March 28. However, Congress recently extended the fee reductions and loan guarantees through April 30, or until funds are exhausted.

For now, interested businesses should contact the SBA office nearest to them, which can be found on the agency's Web site. Jeanne Hulit, the SBA's New England region administrator, urges businesses to seek a bank that is an experienced SBA lender.

Banks granting SBA loans are placing increased emphasis on business plans, cash flow and profit forecasts in deciding whether to lend, she says. The SBA also can refer businesses to free counseling centers to improve their performance.

Online opportunities

Another source for loans is the Internet. There are several sites where businesses can seek alternative lenders such as individuals and small companies.

One such site is RaiseCapital.com, based in Port Washington, N.Y. The site has a network of more than 5,000 investors and lenders, says Robert Bertsch, RaiseCapital.com president. Loans made on the site range from $10,000 to $2 million.

"We see more and more small companies or individuals teaming up where banks won't," Bertsch says.

Interest rates range from 8 percent to 15 percent. While that's generally more than a bank will charge, it's much less than what you'll have to pay on many credit cards.

Companies that use RaiseCapital.com pay a one-time fee of $99. Some other sites -- such as ondeckcapital.com, BusinessFinance.com and LendingClub.com -- are free, although their costs are likely to be reflected in loan rates. 

If you're going to list your company on one of these sites, describe your business in clear and concise language.

"You can't have typos," Bertsch says. "Right away that will turn off whoever is looking."

Make sure you don't give away any proprietary information and consider using pictures or videos.

"It's true that a picture tells a thousand words," Bertsch says.

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