Small Business Loans are often the first choice for small entrepreneurs as a source of finance for starting their business. Learn more about Small business loans and other options available.

Small business loans are loans that are given to relatively small business houses with few assets and generating a moderate amount of revenue and profit every year. Whether a business would qualify as a small business and get a small business loan depends entirely on the lender, however, there are few factors that any lender would consider before offering a small business loan to an entrepreneur. These factors would generally include value and type of asset owned, revenue and income generated annually, number of years the business is in operation, number of employees etc.

Small business loans can sometimes be very difficult to get, as there are often strict restrictions in regards to size of the business and other criteria. Also, generally all small business loans require a personal guarantee from the business owner and also the small business loan amount to be secured by the assets of the business.

A small business owner needs to ensure that his business generates enough revenue to instill confidence to the lender that the business is capable of repaying the principle and the interest amount for the small business loan. Some of the most common sources for small business loans are commercial banks, private finance companies and the SBA (Small Business Administration).

Other than the requirement for a personal guarantee to obtain a small business loan there are few other disadvantages. One of the main disadvantages of taking a small business loan is that it can affect the personal credit rating of the business owner and negatively affect his position with the bank.

Also, as these small business loans need to be secured by personal guarantee and business assets need to be provided as collateral, it might result in lose of assets in case of a default. In almost all cases the lender reserves the exclusive right to decide what constitutes the default and the small business entrepreneur needs to abide by those term.