Lending to Start-ups: The Role of Competitive Strategy

An existing concern regarding economic expansion, addressed by the Small Business Administration (SBA), is that start-up businesses may be unable to obtain adequate funding. Without the financial incentives currently offered by the SBA, potential entrepreneurs might be forced to forgo good business...

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Bibliographic Details
Published in:Commercial Lending Review 2007-01, p.40
Main Authors: Beneda, Nancy, Moser, Steve
Format: Article
Language:English
Subjects:
Alliances
Business plans
Cash flow
Certification
Collateral
Commercial credit
Competition
Competitive advantage
Corporate planning
Credit analysis
Entrepreneurial finance
Funding
Interest rates
Investments
Loan review
Product differentiation
Small business
Startups
Success
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Summary:An existing concern regarding economic expansion, addressed by the Small Business Administration (SBA), is that start-up businesses may be unable to obtain adequate funding. Without the financial incentives currently offered by the SBA, potential entrepreneurs might be forced to forgo good business investments because of the inherent risks and costs involved with starting a new business. Banks generally have been reluctant to offer long-term loans (greater than three to five years) to small firms. This article examines the review of the competitive strategy, as part of a review of the business plan, by commercial lenders. The authors study suggests that the review and approval of a well-written business plan by commercial lenders during the loan application procedure serves to validate that a start-up business is viable. This certification process tends to promote the development of high-quality start-up businesses. This survey suggests that the commercial loan review process plays an important role in validating the viability of start-up businesses.
ISSN:0886-8204