For many small businesses, obtaining a business loan can mean the difference between success or failure. Finding different types of small business loans and their associated funding sources is the easy part but getting approved is relatively difficult.

Like all other loan- car, home and land it boils down to this three conditions the ability to pay back, ability to collateralize, and credit reliability. Regrettably, for business owners displaying capability to repay isn’t that easy as showing current check statements. Neither is collateralizing as fast as a car or home loan which usually self-collateralizes. But just as there is mechanisms in position to make car and homes loans, there is a process for business loans.

The very first thing you ought to do is to make sure the personal credit of your business is good as well as the loan of your business. In so many cases, credit applications for businesses would call for up to ten credit recommendations. The next thing is to make sure the financial records are good. The balance sheet, the revenue and loss statement, and the financial statement ought to be in order.

After that, you have to come up with a business plan. You have to present your financials into two forms the narrative and the projected financial report which is the most important part. It should lay out and show the lenders how the business will use the borrowed funds and the marketing strategies to be use to have a maximum profit to repay the money but will never show how the business will intend to collaterize the loan.

Should a business be unable to exhibit the capability to pay, have creditworthiness, or have collateral obtaining financing could be hard. That is one good reason it is usually good to secure financing or a line of credit when times are great for a business. Apparently, when a business demands it most of the time it may not be there. The old saying is true, banks primarily wish to give money to people who don’t want it.

There are options for businesses that may have difficulty getting financing but the price is often high. Sometimes an investor can help but will want part ownership. Factoring is another option, which is some who prepays on accounts receivable. Downside to factoring is the rates are very high, one could receive only 70-80% of the value of their accounts receivable. Finally, there is community based lending but this is often done as microloans. Microloans can be defined as loans under $35,000 dollars. This may not be enough for many existing businesses that would want to expand. Still, its nice to know that there may be other forms of capital a business can acquire.

Chris Sandler is a freelance writer and loves to write about this great business loan.