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Small Business Loans: Interested in Interest?

Even IT service firms need to know about interest rates. The small businesses that IT firms service also need to know about interest rates. So, are you interested?

When it comes to interest rates that small business can expect to receive for operating or start-up expenses, there is good news and bad news.

The good news is that interest rates for commercial bank loans are at all-time lows, thanks to the Federal Reserve Bank's easing of the key federal funds rate -- as of Oct. 2010, it stood at about 0.25 percent.

The bad news: On the whole, low interest rates have neither markedly boosted bank lending nor aggregate demand consumer to business and business demand.

With that in mind, even for those with good cash positions and credit standing, financing availability through traditional means is at a premium and thus remains a major concern at most IT solution providers. That's because without at least having access to lines of credit, a firm can't make the necessary investments to purchase the hardware, software and partner service options.

Here's some clues on what you need to get that paper if you're still interested (well you should be and that's the last time that turn of phrase will be used -- I promise):

  • Personal and business background information -- resumes, business plan, executive summaries etc.
  • Personal and business financial statements -- for an existing concern, this includes personal credit and tax history as well as copies of company balance sheets, revenue and/or profit and loss statements
  • Projected financial statements -- documents, include at the minimum, a detailed one-year projection of revenue and profits with a written explanation of how the company will meet those projects
  • Ownership and organizational structure -- this includes articles of incorporation--LLC, Inc., S-Corp. etc.--and a list of partners, corporate officers or investors
  • Copies of deed or lease of physical property and fixed assets -- any leasing of space to house your administrative and business activities has documentation and a note from landlord or property management company giving terms of proposed lease is necessary for lenders to calculate overhead costs
  • Statement of loan or financing reason -- explain what the loan or credit is for; if it's expansion, you must include asking price and/or project costs associated with inventory, machinery and equipment, furniture and fixtures or payroll data if you plan to use a loan to hire more people

Now that you know how much work is involved, it's time to go get 'em.

Posted by Jabulani Leffall on October 11, 2010