Need a small loan to start your business or keep it going? Getting a small loan from a bank should be easy if your credit is good, right?
Well, not always. Although about two-thirds of all small business who get loans do so through the commercial banking systems, business owners often find that banks aren't terribly interested in granting small loans. The reason: small loans take just as long to process as big ones, and the banks stand to make a lot more profit from a big loan.
But there are banks who make microloans - and you can find out who they are in the latest edition of "Micro-Business Friendly Banks In The United States." The report is published by the Office of Advocacy of the U.S. Small Business Administration (SBA) and lists the name of micro-business-friendly banks by state. The report is available in PDF format on the Office of Advocacy web site at http://www.sba.gov/advo/
According to the report, the good news for micro-sized businesses is that American banks increased their micro-business loans by 10% in 2001, making access to credit a bit easier.
But while access to credit has improved, the study finds "strong indications" that much of the increase in micro-lending over recent years has been the result of a tool small businesses have traditionally used when banks said "No": credit cards.
The difference now? Banks and other lending institutions have been offering the self-employed and other very small business owners business credit cards, and promoting them as a way to keep their business and personal credit card debt separate. Depending on the business owner's personal and business credit, the cards come with credit lines that can go up as high as $100,000.
A word of warning: although these business credit cards are often promoted as a way to "free up" your personal credit card, remember that they will still be backed by your personal guarantee. If the business can't pay the credit card debt, you'll be responsible for paying it out of your own pocket.