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Most entrepreneurs require to have access to capital at some instant. The good news is, at present there are scores of distinct business loan programs. Regrettably, that's also the sorry news. In other words, the funds are at hand, nevertheless it can be confusing to decide which business loans to apply for, especially since many business loans support certain things.

As soon as it comes to the financing popularity contest, equity funding is presently in vogue. Stories in the mainstream media about venture capital have glamorized the concept of promoting stock in your startup, and entrepreneurs across the board would to a large extent prefer to create money in the form of equity rather than debt.

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Equity is so appealing because it feels like you are being paid "free" cash during the startup stage. There are typically no reimbursement obligations and no interest payments owed to equity investors. You will furthermore have some voice in negotiating the cost of your stock, any dividend payments and the stance the financier will have in your business. If your company goes belly-up, it's their loss (unless, of course, your investors can prove in court that you did not reveal essential information that would have influenced their decision to invest).

As well as providing funding, equity investors can be of use in extra ways as well. They bring their business experience and lessons learned to bear on your company, and they can turn out to be a mentor. The greatest equity investors are those with expertise in your business, familiarity launching a business, a cool character and a large bank balance. Some say choosing an equity investor is comparable getting married-you're making yourself answerable to this person through thick and thin, so choose carefully.

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Before you go investor shopping, though, you ought to carefully think about just what you are selling and what having equity investors really means for you and your business. Very few businesses will ever be able to hand over a decent return on investment (ROI) for equity investors. The usual restaurant or retail store, for instance, is not likely to have any liquidity for its shares. And even if you plan to have a high-growth tech business, the probability of getting liquidity for your first investors is low. You should be honest with yourself regarding whether your investors expect to be remunerated.

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What about good, old-fashioned loans?

If the sheen of equity capital is stained by the reality of having to generate a respectable return on investment, you can fall back on a loan. The nice news regarding debt financing is that you're in spite of everything wholly in charge of your company-your solitary job to your lender is to achieve your payments on time, as spelled out in your promissory note. As long as you do that, your lender has no right to meddle in your business. Interest payments are typically a deductible business fee, and if your lender is someone you know well, you may perhaps be able to get positive repayment terms that can make the loan walk and talk much like an equity investment.

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There are several ways to create this flexibility:

• Defer the start date of repayment by adding a "grace period." Startup loans often have a six- to 12-month grace period before repayment starts, providing entrepreneurs with some time to ramp up the business.
• Capitalize interest. Your lender can also capitalize the deferred payments so they don't lose interest funds during the grace period. This allows you to pitch a lender by suggesting a much longer grace period (if you think you'll need more than 12 months).
• Use interest-only payments. If your lender wants to be repaid immediately, offer to make interest-only payments for a period of time to keep your monthly budget in check.
• Institute graduated payments. You can create a unique repayment schedule with low payments at the start of the loan and higher payments at the end when your business is proven.

For lenders who are very cautious about making a loan, you can offer to provide collateral on the loan, such as a lien on your car or home equity. Be careful, though: If your business isn't yet well established, taking on this type of risk too early could be a bad move.

Another solution that some entrepreneurs have used to find a happy middle ground between debt and equity financing is convertible debt, which is simply debt that converts to equity as the business grows.

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In order to corroborate that you�re worth the money, you�ll want to prepare some documentation. First, your personal credit history is relevant to your small business loan � especially if your business does not have a long operating history. They will assume that you operate your business in the same manner that you manage your personal finances. Bring your credit history with you to reference as necessary.

Next, bring financial statements for your business. You’ll need to show your business’s financial health. They want to know how much it’s worth and how much money you’re moving. If you’re serious about small business loans, then you’ll also want to prepare detailed pro-forma statements. These give projections about what your business will be worth going forward.

Finally, be sure you have an updated business plan. By preparing a detailed business plan, you’ll already have your financial statements and pro-formas prepared. Banks award small business loans to those that have everything spelled out and planned. I strongly suggest that you prepare a plan with as much detail as possible – including bios of you and your partners, your track record, your strategies and advantages, and more.

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