Todd Fulton

Tuesday, 04 November 2003 06:57

Natural resources

The challenges of financing a new business or expanding an existing one are formidable, and there's no single formula for raising business capital.

With conventional loan financing, lenders want to see a business plan. Borrowers who clearly show how much they need, why they need it and how they'll pay it back find a warm welcome from investors and lenders.

The U.S. Small Business Administration provides venture capital and support for bank loans for small businesses through traditional lenders and provides training and educational support to entrepreneurs.

The SBA works with thousands of lenders and educational institutions, supporting loans through loan guaranty programs. When a business applies for business capital, the lender can make the loan directly or request an SBA loan guaranty. The borrower must meet SBA criteria and the lender must certify that it would not provide funding on reasonable terms without the guaranty.

The SBA can guarantee as much as 85 percent of loans up to $150,000 and 75 percent on loans of more than $150,000. The maximum guaranty is usually $1 million, although there are exceptions.

Businesses must operate for a profit, be or propose to be engaged in business within the United States or its possessions; have reasonable owner equity to invest; use alternative financial resources first; be independently owned and operated; and not be dominant in its field. Interest rates are pegged to the prime rate and negotiated between the borrower and lender.

Many full-service banks also help small business owners through loans, advisory services or partnering with community groups that help a company get financing. Todd Fulton is senior vice president, business banking, KeyBank. Reach him at (614) 442-6038. Visit the SBA's Web site at