If you are in need of finance for starting you own small business, you can choose from vast number of loan sources which cater especially to small businesses. Every state or district has a small business association which tries to help people who are trying to set up their own small businesses. These associations liaise between you and lending institutions and have expertise in setting up small firms.
You can approach lending agencies that specialize in small business loan. Most of the banks and financial companies have separate division for such type of loans and these divisions are managed by professionals who understand the nitty-gritty of small businesses. They not only lend finance, but also guide you in setting up and running you small scale enterprise.
While selecting small business loan packages, following points can be useful.
1. Asset based financing refers to transaction where a lender agrees to accept collateral and assets of a firm in lieu of a loan. Majority of asset-based small business loans are collateral in lieu of other accounts receivable, equipment or inventory and accounts receivable is favored by most of the lenders.
2. Line of Credit refers to setting aside designated funds by the lender for the firm to draw when needed. Line of credit decreases with usage of funds and is replenished when payments are made. Major advantage in this case is that interest accrues only when the funds are actually used.
3. Floor planning involves keeping borrower’s inventory as collateral in lieu of loan. Car dealership is one example of floor planning package.