Small Business Startup Loans

Wall Street Capital Financing Can Help Your New Business Flourish!

Starting a business is a life changing event; the only two that top it for changing how you see the world is getting married and having a child. In a lot of ways, having a business is like having a child – you have your dreams for how you want it to succeed and thrive…and those dreams take money to turn into reality. Enter the small business startup loans.

One in seven small businesses fail within the first year of starting operations, and the primary cause of failure is under-capitalization. If that’s an unfamiliar term for you, it’s a very simple one to grasp – it means running out of money. The best way to keep in the money you need for day to day operations is to get a small business loan.

Metrics For Small Business Startup Loans

To determine how much of a small business loan you’ll need, you need to take a hard look at some metrics – measurable factors – about your business. Tally up what a month’s typical fixed expenses are: Your rent, your utilities, any payment plans on equipment that you’ve purchased for the firm, and more. Next, look at your company’s costs of doing business – this is the cost of any employees (their salaries and benefits and the tax liabilities they incur), then your company’s costs of materials for good sold.

Tally all of these things up, and multiply them by one and one sixth. Take that number, and multiply it by two year’s worth of expenses. That’s approximately the amount of capital you’re going to need to keep the business running day in and day out for two years – it will usually take two years of operation before you start to show both a positive cash flow and a net profit after expenses.

Now that you know what your capital needs are, it’s time to look at how much you can put into the business, and how much you’re going to need in the form of small business startup loans, or outside investing.

Government After Savings and Loan of the 1980’s

One of the side effects of the Savings and Loan bail out of the 1980s is that it became very difficult for banks to write loans to small businesses; the raft of bad loans in the late ’80s combined with a credit crunch resulted in stringent regulations on the amount of risk a small bank could take with its loan department. Realistically, this made it all but illegal for a bank (but not a credit union) to write a loan of sufficient size to see most small businesses past their first two years risking “crib death”.

In reaction to these regulations, the Federal Government helped sponsor the Small Business Administration (SBA), which is dedicated to providing entrepreneurs with the basic business education needed to launch and nurture a business – this includes classes on marketing, advertising, tax preparation, and how to organize a business plan.

SBA Guarantees to Banks

It also included a program called SBIR or SBA loans – these aren’t actually loans per se, but they’re guarantees to banks that the SBA will cover part of the loan if you default – you have to sign some property over to the SBA as collateral, turning this into a collateralized loan.

While you may be desperate for start up capital, do take the time to do due diligence on your loan shopping. Look carefully at the terms and the interest rate, just like you would when filling out a car loan or a mortgage. Just because it’s a small business loan doesn’t mean you shouldn’t read it carefully!

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