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The majority of entrepreneurs require to have access to money at some time. The pleasant news is, at hand there are countless distinct business loan programs. Unfortunately, that is also the adverse news. In other words, the cash is out there, although it can be puzzling to determine which business loans to submit an application for, in particular because scores of business loans fund particular things.

When it comes to the financing popularity contest, equity funding is at present in fashion. Articles in the mainstream media as regards venture capital have glamorized the idea of promoting stock in your startup, and entrepreneurs across the world would much have a preference to create money in the form of equity rather than debt.

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Why is equity so appealing? Because it feels like you're receiving free cash during the startup period. There are commonly no repayment obligations and no interest payments due to equity investors. You'll as well have some voice in negotiating the outlay of your stock, any dividend payments and the position the shareholder will have in your business. If your business goes belly-up, it's their loss (unless, of course, your investors can verify in court that you didn't unveil serious info that would have influenced their decision to invest).

As well as providing funding, equity investors can be valuable in extra ways as well. They pass their business know-how and lessons learned to bear on your company, and they can become a board member. The greatest equity investors are those with know-how in your industry, familiarity launching a business, a cool nature and deep pockets. Some say choosing an equity financier is similar getting married-you are making yourself accountable to this person through thick and thin, so select carefully.

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Before you go investor shopping, though, you must prudently think about just what you are promoting and what having equity investors in fact means for you and your company. Very few businesses will ever be able to hand over a good return on investment (ROI) for equity investors. The average restaurant or retail store, for instance, is not likely to have any liquidity for its shares. And even if you plan to possess a high-growth tech business, the likelihood of accomplishing liquidity for your first investors is low. You should be truthful with yourself regarding whether your investors expect to be remunerated.

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What about good, old-fashioned loans?

If the gloss of equity capital is tarnished by the reality of having to generate a respectable ROI, you can fall back on a loan. The pleasant news about debt financing is that you are still totally in charge of your company-your single undertaking to your lender is to make your payments on time, as spelled out in your promissory note. As long as you do that, your lender has no right to intervene in your business. Interest payments are typically a deductible business amount, and if your lender is someone you know well, you may be able to get favorable 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�re worth the money, you will 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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