Compared with large enterprises, small business have less financial transparency and lower ability to resist risk. So their direct financing ability from capital market and bond market is very weak. In the 1990s, only 2% of the financing of small businesses in the United States was financed from institutions outside the banks, most of them relied on bank loans.
The situation of small farmers is even more pathetic, with more than 99% of the funds needed to rely on banks. Do banks prefer small businesses over capital investors and bond investors? No. People often say that banks perefer bigger companies than small ones. Banks have no incentive methord for small business care. So why didn’t banks turn down small businesses? One of the main reasons is the mandatory requirements of the law. So what are the procedures that small businesses need to get a bank loan?
1. Raise 1/3 Start-up Capital
Small business owners must have one-third of total loan fund.