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Accessing Capital for a Small Business

Small businesses face a continual dilemma: they often need money to grow, but banks are reluctant to provide them loans or a line of credit due to insufficient assets and poor cash flow. If you are a small business owner, how can you gain access to capital in order to help your business survive, grow and thrive?
The first thing you must do is determine your credit rating with the main credit agencies. If there are items on your credit report that can be deleted or improved (such as mistakes by retail stores, incorrect collection reports, or late payments), then take care of those items immediately. Request a re-score, and once your credit is clean, then you will be ready to begin applying for lines of credit.
Establishing good relationships with a variety of banks is helpful. Many small businesses make the mistake of relying on one bank for all their needs. But that bank may not provide sufficient credit or, worse, none at all. By explaining your financial and credit needs to several banks, you increase your chances of accessing credit and other forms of financial assistance. There is nothing wrong with having lines of credit simultaneously with several banks. Having multiple lines of credit is also a good way to improve your credit rating.
Debt financing requires that you qualify for a traditional bank loan, or that you find a bank that can provide you a loan with an SBA guaranty. The lending process is difficult, but can be instrumental in providing debt financing. In fact, some entrepreneurs would say that their relationship with their banker has been the pivotal ingredient to growth. With loans, you don’t have to relinquish control or equity in your business in order to get funded. You build a powerful relationship with your banker that can open up additional forms of debt financing you may need to fund future growth.
However, bank loans typically go to existing small businesses with at least 2 years of history and credit. New businesses with little or no history may have difficulty accessing these loans. In addition, with bank loans, you must pay interest, and if you don’t keep current with your loan payments, you could find yourself in a tough spot with the bank and a deteriorating credit rating. You may also be required to provide personal collateral, such as your home, to obtain the loan. So what are some alternatives to conventional bank loans?
The U.S. Small Business Administration has a variety of programs to assist small and medium-sized businesses gain access to capital for expansion and job creation. The 7(a) guaranteed loan program is SBA’s primary lending program. Loans are typically $25,000 to $2 million, and are paid in monthly installments. The funds can be used for a variety of purposes such as working capital, real estate acquisition, and equipment purchases.
The SBA Micro loan program is also available for new, small businesses to access credit and technical assistance. The 504 Certified Development Company Loan program provides existing, growing businesses with fixed rate, long-term financing for fixed assets such as land and buildings. An SBA program can generally be found for businesses of all sizes and capital requirements.
The SBA assesses loan candidates using the following general criteria:

  • Re-payment ability
  • Management experience
  • Equity (you need to have sufficient capital of your own in the business)
  • Credit history

Check the local banks in your area that are eligible to offer SBA loans. You may also find complete information about SBA loans at
Many states also have programs designed to assist companies in the Food and Agriculture industries. Check with your state’s Department of Agriculture (USDA), which often provides assistance regarding promotions, marketing, and access to funding.
Finally, if your business exports products abroad, there are many government agencies and NGOs which provide assistance. The Department of Commerce has a wealth of information which can be helpful to fledgling U.S. companies interested in or already exporting. For example, the U.S. Commercial Service has an excellent website providing complete information:
In addition to government-sponsored programs, consider private investors. Angel investors, for instance, are another means of accessing capital. These are usually private investors seeking above average returns of their capital. They may have a passive interest in your business or industry, but generally do not exert management control. They are often “silent” investors seeking only to receive a fixed interest rate return or percentage of profits.
Do not neglect the ability of friends and family to contribute needed capital to your business. It may be a long-lost rich uncle who is willing to provide a capital infusion, or your own brother or best man in your wedding. You may need to consider other factors when approaching friends and family, but they know you, trust you and may be willing to take a risk on your integrity in knowing that you will one day return their money and probably also provide an acceptable return on their funds.
Being properly funded to seize opportunities is critical to growing a small business. Without access to capital, emerging companies struggle to grow, often stagnate, or eventually collapse. A manager’s ability to secure capital should not be neglected and is a key ingredient to success.
–Peter M. Guyer
Peter M. Guyer is the Founder and President of ATHENA MARKETING INTERNATIONAL (, an international marketing, consulting and business development firm serving food and beverage manufacturers. Tel. (206) 749-9255.