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Nearly all entrepreneurs have to have access to money at some stage. The good news is, at hand there are numerous distinct business loan programs. Unluckily, that is in addition the sorry news. In other words, the funds are out there, except it can be bewildering to choose which business loans to make a claim for, in particular since countless business loans fund specific things.

As soon as it comes to the financing popularity contest, equity funding is currently in vogue. Stories in the mainstream media on the subject of venture capital have glamorized the concept of selling stock in your startup, and entrepreneurs across the world would to a large extent wish to create money in the form of equity rather than debt.

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Equity is so appealing as it feels like you're being paid free money throughout the startup period. There are by and large no refund obligations and no interest payments owing to equity investors. You'll in addition have some voice in negotiating the outlay of your stock, any share payments and the importance the shareholder will have in your business. If your company goes belly-up, it's their loss (unless, of course, your investors can confirm in court that you didn't divulge vital information that would have influenced their decision to invest).

As well as 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 advisor. The greatest equity investors are those with know-how in your business, familiarity launching a business, a cool temperament and a large bank balance. Some say choosing an equity financier is like getting married-you're making yourself accountable to this individual through thick and thin, so select sensibly.

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Before you go investor shopping, though, you should carefully reflect upon just what you are selling and what having equity investors in actuality means for you and your company. Very few company's will ever be able to provide a decent return on investment (ROI) for equity investors. The usual restaurant or retail store, for example, is unlikely to have any liquidity for its shares. And even if you plan to boast a high-growth tech business, the possibility of attaining liquidity for your early investors is low. You must be sincere 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 marked by the realism of having to generate a respectable ROI, you can fall back on the old familiar friend: a loan. The pleasant news as regards debt financing is that you're still totally in charge of your business-your lone duty 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 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 favorable reimbursement 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 prove that you�re worth the capital, 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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