Some are huge, global institutions. But most--more than 88 percent--are smaller, community-based companies with assets of less than $300 million. They are by far the largest source of credit for small businesses. About 37 percent of all small business firms obtained some sort of financing from a bank in 1997. Banks offer various types of financing. Some examples of the types of loans banks offer include: lines of credit, revolving loans, ferm loans, mortgage loans, letters of credit, construction loans, letters of credit, construction loans, lease financing and agricultural loans.

There Are also savings institutions. As of June 1997, there were 1,852 FDIC insured saving institutions in the US. Traditionally, they offer real estate oriented loans, but in their latest incarnation, they offer much of what the commercial banks offer. Keep in mind, however, that banks and thrifts are regulated. They are entrusted with depositor funds. As such, they are extremely conservative when it comes to lending and usually do not finance businesses where the historical cash flow cannot amortize the loan.

There is also the commercial finance industry. At the end of 1996, the commercial finance industry had outstanding loans totaling $169.5 billion. A promotional brochure of the Commercial Finance Association, a trade group of asset-based financial organizations, lists the following types of financing that the members offer: secured lending, non-recourse factoring, full-recourse factoring, discount factoring, maturity factoring, non-notification factoring, notification factoring, spot factoring, floor plan financing, leasing, purchase order financing and real estate financing.

Let's not forget mortgage bankers and mortgage brokers that offer commercial real estate loans. And of course, we would be remiss not to add the federal and state government and quasi-government lending programs such as the SBA 7(a) Guaranteed Loan program, SBIC Financing and state sponsored economic development loan programs. Finally there are the multitude of private lenders made up of individuals and groups.

Not too long a list?: Consider that these are only the general classifications. A lender within a category may have other parameters such as minimum loan size, location of business, credit profile or preferred collateral. Suddenly, the permutation gets larger. But wait--that is just the supply side of financing. What about all the borrowers?

A profitable earning history, but not enough to meet that aforementioned guideline, may mean that the business will rely on improved earnings performance in the future or the turnover of assets to amortize the debt. This indicates an average quality credit and may rely more on asset based financing. An unprofitable history with turnaround prospects leans to the poorer credit quality. Naturally, there are numerous other factors that are taken into account when assessing creditability (balance sheet equity, collateral, character, industry trends) and this short outline does not attempt to be all-inclusive. There are always exceptions. The bottom line is that you must be realistic in evaluating the profile. Where does the business fall on the scale? If it is not a credit gem, don't worry. There are different lenders that make a market in high quality, average quality and yes, even low quality borrowers.