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On the whole entrepreneurs have to have access to funds at some position. The pleasant news is, at present there are countless distinct business loan programs. Alas, that's in addition the adverse news. In other words, the money's out there, except it can be bewildering to decide which business loans to apply for, especially since numerous business loans finance particular things.

As soon as it comes to the financing popularity contest, equity funding is at present in fashion. Stories in the mainstream media as regards venture capital have glamorized the concept of promoting stock in your startup, and entrepreneurs across the world would to a large extent have a preference to raise money in the form of equity instead of debt.

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Why is equity so appealing? Because it feels like you are receiving "free" money during the startup stage. There are frequently no settlement obligations and no interest payments payable to equity investors. You'll in addition have some shout in negotiating the cost of your stock, any share payments and the stance the shareholder will have in your business. If your company goes belly-up, it is their loss (unless, of course, your investors can attest in court that you did not disclose essential info that would have influenced their decision to invest).

Likewise providing funding, equity investors can be accommodating in extra ways as well. They bring their business experience and lessons learned to bear on your business, also they can turn out to be a board member. The top equity investors are individuals with wisdom in your business, know-how of launching a business, a cool personality and a large bank balance. Some say choosing an equity investor is like getting married-you are making yourself held responsible to this person through thick and thin, so decide sensibly.

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Before you go investor shopping, though, you ought to carefully reflect upon just what you are selling and what having equity investors in fact means for you and your company. Very few company's will ever be able to provide a good return on investment (ROI) for equity investors. The normal restaurant or retail store, for instance, is not likely to have any liquidity for its shares. And even if you plan to boast a high-growth tech business, the probability of getting liquidity for your initial investors is low. You ought to be sincere with yourself about 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 realism of having to generate a respectable ROI, you can fall back on a loan. The decent news concerning debt financing is that you are in spite of everything completely in charge of your business-your solitary undertaking 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 pry in your business. Interest payments are typically a deductible business amount, and if your lender is someone you know well, you might be able to get helpful reimbursement 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 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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