Financing a Small Business:
Saving Money to Help Your Company Grow

Here are tips on borrowing to start or operate a small enterprise.

1. Plan to borrow money with a business loan instead of using your personal credit card. "For some small business owners, particularly those at startup companies, a personal credit card may be their only or best option for financing expenses," said Luke Reynolds, an FDIC Community Affairs Specialist. "But for many owners, a business loan will be a much less expensive option," he said, because the bank loan will be secured by the business' property or equipment.

2. Consider an SBA-guaranteed loan. Under this program, the U.S. Small Business Administration (SBA) guarantees a portion of a loan, often up to 85 percent, and enables a small business owner to qualify for attractive interest rates and financing options.

3. Research local small business loan programs. These programs may include loans with below-market interest rates or no origination fees. Start by contacting your state or local department of economic development.

4. Shop around for good deals and good service for small businesses. Ask about loans as well as deposit accounts and other services for small businesses. Some banks may specialize in serving companies like yours.

5. Develop a good working relationship with a banker who can help you save money. Look for someone who seems genuinely interested in your business and the market you serve. "The more the banker understands your company and its needs, the more likely he or she can help you with everything from financing and getting the best interest rate to referrals," Reynolds said.

6. Keep your own credit record in good shape. If you apply for a business loan, the lender will likely review the personal financial statements of the main owners of the business. Concerns about the financial skills of the owners can raise the interest rate on a business loan.

7. Learn tips on saving money from experts. Sign up for free or low-cost workshops and confidential counseling for small business owners. Start with the local SBA office (for referrals to local resources), SCORE (formerly called the Service Corps of Retired Executives, a nonprofit SBA partner that provides free counseling to small businesses), and various small business development centers (generally operated by schools, nonprofit organizations and corporations).