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Nearly all entrepreneurs need to have access to funds at some instant. The good news is, there are loads of different business loan programs. Alas, that is additionally the sorry news. In other words, the cash is out there, but it can be perplexing to determine which business loans to make a claim for, in particular for the reason that scores of business loans finance particular things.

When it comes to the financing popularity contest, equity funding is at present in vogue. Stories in the mainstream media with reference to venture capital have glamorized the concept of promoting stock in your startup, and entrepreneurs across the world would much choose to create money in the form of equity more readily than debt.

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Why is equity so appealing? Because it feels like you're in receipt of "free" money during the startup period. There are customarily no settlement obligations and no interest payments owing to equity investors. You'll in addition have some shout in negotiating the cost of your stock, any dividend payments and the stance the backer will have in your business. If your business goes belly-up, it's their loss (unless, of course, your investors can show in court that you didn't disclose essential information that would have influenced their decision to invest).

Likewise providing funding, equity investors can be of use in other ways as well. They pass their business experience and lessons learned to bear on your business, plus they can become a board member. The preeminent equity investors are individuals with know-how in your industry, experience launching a business, a cool nature and a large bank balance. Some say choosing an equity financier is like getting married-you're making yourself responsible to this person through thick and thin, so decide with care.

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Before you go investor shopping, though, you should prudently reflect upon just what you are promoting and what having equity investors in fact means for you and your business. Very few company's will ever be able to deliver a decent return on investment (ROI) for equity investors. The normal restaurant or retail store, for example, is unlikely to have any liquidity for its shares. And even if you plan to carry out a high-growth tech business, the possibility of accomplishing liquidity for your first investors is low. You should be honest with yourself about whether your investors expect to be remunerated.

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What about good, old-fashioned loans?

If the sheen of equity capital is marked by the reality of having to produce a respectable ROI, you can fall back on the old familiar friend: a loan. The decent news as regards debt financing is that you're in spite of everything wholly in charge of your company-your only 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 cost, and if your lender is someone you know well, you might be able to get helpful settlement conditions 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 prove that you are worth the capital, 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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