Finding – then obtaining – small business funding to start or grow a business can be confusing. Interest rates continue to be amazingly low, and summer reports showed a surge in small business borrowing, (up 25% in May and 28% in June, according to Federal Reserve Board Governor Elizabeth A. Baker).

So, why can’t you get your hands on it?  Read on for three tips to help you get your fair share of small business funding.

Find a lender  The US Small Business Administration has an invaluable website. Just click on your regional SBA office and enter your zip code for a list of lenders authorized to make loans for small business funding. The page provides banks, addresses, phones, and maps. It also provides extensive information on resources in your state and locale including workshops on loans and application.

Think small  The SBA Micro-loan Program makes loans available for as much as $50,000, the average loan is more like $10 to 15,000. The loan can be used for most business purposes – except the payment of debt or the purchase of real estate. Interest rates are determined by the lender but must reflect current Fed rates. The lender has the right to demand collateral and continuing training for the borrowing owner.

Have the courage to borrow  The Fed’s rates are close to 0%. The White House continues to press SBA approved lenders to account for their small business lending. Moreover, the banks decline fewer than 12% of the applicants and fewer than 5% of small business borrowers default on their loans.

The overwhelming majority of small businesses start with personal investments – in addition to those of family and friends. What appears to discourage small business borrowing from approved lenders is the process itself. Applying for and obtaining small business funding is detailed and slow. Among reports  oft required are detailed balance sheets, expense statements, business plans, and proof of a loan declined.

There are consultants lined up to show you how to make application for SBA loans, but you can do it yourself. Study the SBA website, attend a workshop, and talk to your banker and CPA. Among other things, this is good discipline:  planning, detail, and patience are virtues you need to succeed, whether or not small business funding is something you need.

The increasing importance of credit union financing in small business operations and lending has recently been the topic of an SBA Advocacy report. As of this posting, a million customers have moved their checking and savings plans from banks to credit unions. Coincident to the Occupy Wall Street activity and ostensibly prompted by Bank of America’s ill-advised debit card fee, credit unions are swamped by applicants while major banks don’t even seem to notice. What does this “revolution” mean to small businesses?

As recession-bound banks hold back on loans to small businesses, credit unions are taking the initiative. And, with their sudden growth in deposits, they appear ready to move aggressively when Congress raises their cap on loans.

The Small Business Administration watched bank lending to small business decline by 6% in 2010. It also reports credit union financing increased by a comparable percentage. Still, commercial banks lend 200% more than credit unions, so we will have to see if this trend continues. Nonetheless, it’s worth looking at your local credit unions to see what they can do for your small business.

For starters, credit unions account for only 5% of the total lending pool. However, the Small Business Lending Enhancement Act, introduced to Congress in March, could raise the current lending cap to 25% of their assets. This more than doubles their lending potential. With their lending cap raised and their influx of deposits, credit unions will expand, multiply, and hire.

 It is also likely that, as economic confidence returns, lending underwriting guidelines will loosen allowing businesses to borrow more with less secure experience and collateral. Among other things, credit unions are exempt from federal corporate income taxation. They do not belong to the FDIC; instead, they have a separate deposit insurance system and fund – with lower premiums. Such features help them to provide lower-priced products and services. They are non-profits, and this may reduce performance incentives for management.

 Small businesses have been underserved by banks in recent years – despite a $30 billion commitment by Washington. In addition, only 30% of the nation’s credit union lend to small businesses. But, credit unions are seeing gold in the weaknesses in today’s bank market and are upping their staff training to underwrite and market small business loans.

Give it some thought: look at what your local credit unions can do for you, check their credibility with CUNA, move your money if and when it is in your own interest. Remember, that most credit unions – unlike banks – are local and “behave” like small businesses in your community. You may find you have a lot in common.

The Khan Academy is a non-profit organization with a mission to bring free world-class education to anyone anywhere in the world.  So, what does it mean to the small business owner?  Think “Finance.”

We can all use the occasional “brushing up” on our financial knowledge and skills.  In fact, most entrepreneurs didn’t get into their position by majoring in finance or related fields. I think the Khan Academy affords a great opportunity to learn about financial skills for the non-finance type.

For example, look at the inventory of 24,000 videos currently posted:  Core Finance, Banking and Money, Valuation and Investing, and Venture Capital and Capital Markets.  Yours for the asking, and all for free.

Do not expect glossy videos with high production values. (When he started, Khan used to record the videos in a closet at home.) However, they are illustrated on a blackboard like screen with color accents in simple language and visuals that seem to stick with you. Some of the courses fall in sequence, but one of the values is that the study is self-paced.

The videos are exercise-based, but the value is here is in the trial-and-error learning. You learn fast – or you don’t – and, then, you move on. The retention comes from this process; it deepens you understanding, even if you stumble on solutions.

Parents should check out the website for free videos of 15 – 20 minutes in length that tutor your child on all levels of math, most levels of science, and even a few in Art History, Civics, and History. As founder, Sal Kahn, says, “It doesn’t matter if you are a student, teacher, home-schooler, principal, adult returning to the classroom after 20 years, or a friendly alien just trying to get a leg up in earthly biology, The Khan Academy’s materials and resources are available to you completely free of charge.”

The inventory of courses includes a huge number of math lessons, statistics, and SAT Preparation lessors. It includes tests you can self-administer, and it offers courses in lessors on Humanities you might just have a curiosity about. But, keep an eye on the growth in courses related to small business and small business management.

Each year, thousands of aspiring entrepreneurs take the huge step of launching a new company.  And each year, thousands of aspiring entrepreneurs fail in their bid to start a new company!  The unfortunate truth is that the majority of new enterprises will fail within the first year, and nearly all will fail within the first three years.  Only a small handful of companies, statistics estimate about 10%, actually survive the growing pains of the business launch phase and actually become strong, profitable companies.  Although this is true, there is good news.  The large majority of companies that fail, fail due to preventable causes.  In order to successfully launch your company, follow these tips.

Write It Out

For some unknown reason, scores of aspiring entrepreneurs believe it’s possible to build the next great American empire without even writing out the idea in the form of a business plan!  This is absolute lunacy.  You must write out a detailed business plan that discusses the following:

• Management Background and Qualifications
• Complete breakdown of business model
• Marketing Plan
• Financial Projections

You can find free business plan templates online with a simple Google search.

Test Your Idea

Dreamers rarely want critical feedback from those who believe differently.  Take your idea and purposefully share it with key people who have industry knowledge.  The critical feedback these key contacts give you is essential.  They may point out huge gaping holes in your business model, or they may all be very excited for you and believe in the model.  Many entrepreneurs are afraid to engage in this step of the process because it makes them vulnerable, and strong rejections can easily damage a fragile ego.  However, the potential feedback should be viewed as absolutely essential, and you should search for it at all costs.

Raise Capital

Cash is the lifeblood of a company.  The day a company runs out of cash is the day it is out of business.  With this thought in mind, it is 100% essential that you develop a bulletproof financial plan that takes into account every worst-case scenario possible.  Determine exactly how much money you will need to develop and bring your product or service to market.  Then, determine how long it will take to be begin securing sales and generating revenue.  In most businesses, you should have a plan in place for how to finance business operations with the notion of no revenue for 6-12 months.  Once you determine how much capital that will require, determine how you will raise this money.  Do you have it in savings, can you borrow it from friends and family, or do you need to search for investors?  Will you secure a working capital business loan?

Take On Partners

Many new business owners are hesitant to bring on partners.  Starting a business is incredibly difficult and stressful.  A competent partner can help alleviate some of that stress.  Henry Ford used to say that a large portion of his success was due to his ability to always hire people smarter than himself.  If you do take on a partner, make sure to choose someone that has an exceptional skill set in some aspect of the business that you do not have.

Keep Expenses Down

Back to the money again—keep expenses as low as possible.  When starting out, it is easy to fall prey to daydreams of instant success and an easy road.  It won’t happen!  There will be bumps along the way, and if you keep your finances extremely conservative until substantial revenue is being generated, you will greatly increase your chances of escaping the launch phase of the company alive and well.  Even if you do not use it, a working capital business loan can help act as a financial cushion.  Keep your expenditures to products and services that are essential to bring the product to market.  In other words, don’t spend money on expensive office furniture, etc. 

With forethought, research and restraint, your new business launch can be a success.  Without these activities, you’re taking your chances!

This article was contributed by Jason Hoerr at Small Business Loans Direct.  Jason Hoerr is a writer for smallbusinessloansdirect.com, entrepreneur, and trader based in Charlotte, NC.

Is debt-free funding even possible? It can be!  And if you are diligent, you can choose funding opportunities that will minimize your risk and improve your chances of success. Debt-free funding lets you hit the ground running without obligations to anyone.  Consider these ideas to get you “started” (pun intended):

Minimize business startup money.

Choose a business concept that demands little upfront cash, such as an online consulting business or a virtual assistant.

Or, plan a service-oriented businesses. A carpet-cleaning venture or a childcare facility, for example, demands a little upfront capital to get things going. One advantage is that costs are largely upfront and not on going.

Still other businesses are product-based, such as retail or manufacturing. Here, there will be early costs for inventory and infrastructure along with continuing inventory and logistics expenses.

Outsourcing saves time and money.

Recognize that you can’t do everything yourself. If, for example, you’re launching a    bookkeeping business, your skills are in numbers and analysis, not logo design and marketing.

But, adding staff for these tasks adds to early costs.  Consider outsourcing tasks to consultants on a job-by-job basis.  This lets you cut back on expenses and reduce the need for space, staffing, and equipment.

Start slowly, start smart.

Stagger your startup to reduce expense. Break your new business into separate segments or product offerings and limit what you do to start out. You may find you limit your need for traditional sources of small business financing.

Go at it part-time until you’re confident you’ll make it.  If you decide to launch your bookkeeping service, for instance, start by building a small base of clients to work with in addition to your full-time job.  Once you develop a client base, cut back your day job, until you finally quit and make your business your full-time career.

Let’s make a deal.

Approach your current employer about contracting for them. Your boss may be willing to spin off a segment of his business to you, and buy back your services.

If you want to launch your own PR business, you strike up a deal with your employer to use some of their facilities during the startup phase. They could contract with you for services and have the convenience of you being on site. It’s a win-win for both parties as the employer saves the costs of having an employee on board.

Similarly, a new client might be willing to enter an arrangement, allowing you to work out of their office one or two days a week.  Once you get the word out to contacts and colleagues that you’re planning your new venture, you’ll be surprised at the number of leads you can generate.

A novel approach – Save for it.

Start a savings plan now. Create a budget for the first 12 months and save as much money towards the budgeted costs as possible. This will help you with part or all of your business startup funding.

These are just a few of the alternatives to going into debt. Avoid the shackles of debt slavery and find real freedom in starting business debt free.

If you get paid faster, you can improve your cash flow and provide the working capital you need.  How does your business encourage early payment?  What do your invoices say about Payment Terms and Conditions?  How do you get customers to pay their obligations - sooner rather than later?

Take a good, long look at your Accounts Receiveable aging report in order to gauge your current success in this area.   As long as your money is tied up in the collection process, you cannot grow it, invest it, or pay it out. It lacks cash liquidity.  Here are a few basic ideas to help you get paid faster:

Clear Terms and Conditions

One way to improve your cash liquidity position is to communicate clear terms and conditions in your deal making, contracts and delivery. Back it up regularly in your invoices.

Simple terms might show: “Payment Due on Receipt” or “Net 15” (or 10 or 30) if you expect payment within 15 days. This asserts your payment expectation and helps a customer schedule payment.

Encourage early payment

Terms can reward customers by encouraging early payment. The customer has cash flow concerns, too, and may have cash lying in low interest paid checking. If your discount beats that rate, you’ll get paid first.

• For example, your terms might show: “2% 10, Net 30”; that is, while payment is expected within 30 days, you will give a 2% discount if it is paid within 10 days. (You can modify these numbers to suit your needs and/or your client’s billing cycle.)

Terms can also punish late payment. Your cash flow – and your customer relationship – suffers when customers don’t pay on time. So, it is common business practice to include some penalty for late payment. Ideally, this penalty should correspond to your real loss because of the delay. In any case, you want to be clear and consistent in order to maintain and continue the relationship.

Put Terms and Conditions on the invoice form in bold large type. If and when you decide to “liberalize” the terms, send a cover letter or flyer with the invoice to capitalize on your “generosity.” Don’t miss the opportunity to use the invoice to market your willingness to work with clients.

Does your business need cash?  Properly managed A/R (Accounts Receivable) and Collections can give your company the working capital that you need.   

I don’t have to tell you that the current economy makes it difficult for your business to find the cash it needs – you’re living it!  A sluggish cash flow cycle forces small business owners look to relatives, savings, and retirement plans – with little to show for it. Banks are not talking to you, and your credit cards are high interest risks.  Money is sitting in your A/R (Accounts Receivable), and you need a good plan to speed up your Collections.

Learning how to find cash in your own operation is a MUST in lean times. Look at this “cash flow cycle,” visualizing this cycle for your business, and noticing how each segment can change in size:

Your cash cycle is the total number of days that it takes you to create, sell, and collect. The count indicates how many days your cash is tied up, so this reveals your business liquidity – and current and potential lenders really want to know what about your business liquidity.

Each of these cycle segments is worth its own discussion, but let’s focus on one aspect of one way to accelerate the flow of “cash in.” With some growth, you may consider outsourcing collection of receivables to a fulfillment service, but first, let’s look at what you can do in-house.

Present flawless invoices. Design an invoice form and proof them before invoices go out. Be sure they clearly include the following: 

• The business name and correct address for payment
• A specific invoice number that allows payers to match invoice with order
• The customer’s purchase order number – where applicable – with brief description of order or service
• The payment due date and terms and conditions of payment that, might, for example, include early discount or late penalty
• A named person or department responsible for payment

 Our goal is to maximize the efficiency of payment.  Eliminate the back and forth, the calls and the faxes correcting invoices. Get it right the first time, and you will cut down the payment cycle.

Smart business owners can improve their cash flow cycle with a few simple changes to their business practices.

You need funds to start, grow, and expand. The usual sources for small business working capital rapidly disappear in times of economic uncertainty. Banks, venture capitalists, and small business lenders close their proverbial doors to small business owners.  Look to your own cash flow for answers.

In times such as these, small business owners, entrepreneurs, and sole proprietors need to look for cash within their business. If you keep your books using software such as QuickBooks, you can’t expect it to make decisions for you. The software is generally very good at keeping records, calculating numbers, and integrating data for reports, but it’s not built to maneuver and change course.  In short, it’s up to you to improve your cash flow.

• For example, it is very important that you pay your bills on time. That will tie your vendors to you. However, bills do not have to be paid on the date received. You can manage your payment system so that bills are posted so close to the due date that they are paid on time but not before.
• Another source of indirect funding lies in your Accounts Receivable. It is likely that you provide some discount to the payer if payment is made within a certain time, say 2% discount on bills paid within 10 days. Consider the effect of slowly increasing the discount for payment within a shorter period of time and examine the effects of the change on your collections.

Each of these moves would improve your cash flow and, thereby, create a source of small business working capital that allows you to budget, forecast, and quite possibly survive these difficult times.

For many people, a home-based business is a dream come true. Being able to have the flexibility, the additional freedom, more contact with family and lower overhead are valid reasons to want to pursue this venture. And as mobile technology becomes more trustworthy, even if you don’t own your own business, a significant number of employees are working from home one or more days per week.

Many huge companies started out as home-based ventures. Jeff Bezos started Amazon in his garage. Apple’s roots are the same. Mattel started in the home of Ruth and Elliot Handler. Working from home allows you to literally keep your day job while you feel your way, experiment, build an online presence, develop a client base, poke around with different marketing techniques and expand service or product lines. About half of the tv show Shark Tank’s entrepreneur competitors (competing for investment money) operate from home. It has never been easier to launch a product or service based company from home.

Operating a home-based business has tax advantages and allows you to utilize your spouse and children for extra manpower if the business starts booming. Many people prefer to keep their businesses small and at home. Even if it just provides a steady second income, working from home offers peace of mind and independence that a second job simply might not.

While not everyone can afford to dedicate a room or separate dwelling for their home-based business, if you can, do-and make it one with a door. It will be easier for family, friends AND customers to take you seriously if you have fairly set hours and some privacy. But many small entrepreneurs and freelancers work on a laptop on the sofa. There are almost as many different set-ups out there as there are work-from-home folks. Don’t limit yourself because of space! Take a chance and start small.

Utilize wireless technology to network computers and printers, open source software to save money, Skype to make international calls cheaply or for free if that is part of doing business. Build online profileson Twitter and Facebook for exposure, develop your own blog, send out a newsletter, use Elance to find a logo designer. Don’t go deeply into debt for your business. It isn’t necessary!

Are you working from home in a small home-based business?We would love to hear your stories!

I like the concept of bucking the trend of college being the end all. As we discussed earlier, there are alternatives to college and getting deeply into debt. I like this man’s challenge.  It seems most of the critics in the article make the unfounded statement that rich people got that way because of their education. I challenge that and say perhaps they got rich in spite of their education. Most who have “made it” got there not because of a particular formal education but because of who they were, their character and attitude. If not, every educated person would be rich!

Wired recently featured a story about Y Combinator (the Y=Generation Y) which they called “boot camp for startups”. It isn’t a replacement for college but the odds are a significant number of the chosen few either didn’t go at all or dropped out. In fact, the “drop outs” are so numerous and respected that there is a whole website devoted to them: The College Dropouts Hall of Fame. And. Do you think this is a new concern? Check out this 1962 Time article about famous dropouts, including a couple of astronauts: