Many small businesses are launched by the personal resources of their owners. But they can quickly reach the stage where the owner must look to the credit market for financial help in expanding operations.

The banking industry is an important source of working capital. However, entrepreneurs may not realize that applying for commercial credit is a more customized process than obtaining consumer credit, and requires a great deal of preparation by the business applicant.

Small Businesses Loan Sources:

• Self-financing by the owner through an equity loan on his or her home or other assets.

• Loans from friends or relatives

• Private stock issue

• Forming partnerships

• Venture capital, given sufficiently sound business venture plans

Some small businesses are further financed through credit card debt - usually a poor choice, given that the interest rate on credit cards is often several times the rate that would be paid on a line of credit or bank loan.

Many owners seek a bank loan in the name of their business, however banks will usually insist on a personal guarantee by the business owner. In the United States, the Small Business Administration (SBA) runs several loan programs that may help a small business secure loans. In these programs, the SBA guarantees a portion of the loan to the issuing bank and thus relieves the bank of some of the risk of extending the loan to a small business.