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Most Americans have a series of dreams that they hope to achieve in the lifetime. They include owning their own home; raising a family and seeing them head off to college. Those dreams often include having their own small business. The good news is that millions of Americans achieve that goal every year. The bad news is that many more can’t make that happen because they don’t have their own capital or the credit to be able to get a business start up loan.

You would think that access to capital would be the easiest thing in the world for the greatest capitalist country in the history of the world, and in many ways it is, just not the kind of capital that is easily encouraged to invest in a business start up loan. The major reason that it is difficult to obtain a business start up loan is lack of experience in both operating a business and in utilizing business credit. The other reason is risk.

Banks, credit unions, and other lending institutions like to lend money, that’s their business. They lend money out, charge a reasonable rate of interest for the use of this money and then rotate the money out again in the next loan arrangement. But banks are also risk adverse. They don’t like taking chances with their money and many of them see a business start up loan as too much of a risk to take.

The reality is that hundreds of businesses open and close their doors permanently every year in America. Some fail because the business idea wasn’t as brilliant as originally thought, some fail because of management negligence of inexperience, and some fail because the owners do not have the necessary capital to finance the on-going operations of a business trying to break into a competitive marketplace. The banks are observant of this activity and they are also aware that a great percentage of small businesses do not make it past the first year of operation and by the second year the attrition rate is staggering.

So getting a business start up loan is not easy. But that doesn’t mean it is not possible. The best way to get a business start up loan from a bank or credit union is to prepare a solid business plan. This plan should include a survey of existing similar businesses in the marketplace, an identified need for the services or products being provided, and a clear and compelling argument as to how the business can meet that need. The banks want to be convinced that the business can survive before it will even consider providing a business start up loan. Even then the bank may ask for personal guarantees, a co-signer for the loan, or collateral to back up the request for a start up business loan

David Gass is President of Business Credit Services, Inc. His company publishes a weekly e-newsletter on Starting and Growing a Small Business at http://www.smallbusinessconsulting.com. You can sign up for their free newsletter by visiting http://www.smallbusinessconsulting.com.

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