One of the most difficult parts of running a small- or medium-sized business is securing necessary funding. Whether you're just starting out or need capital to finance your expansion plans, you'll likely need to apply for loans from traditional financial institutions. However, if you don't understand the lending process, your loan will probably be denied. 

Perhaps the most important factor to consider is your business' credit. If you're unaware that your company has a credit score, you're not alone - Jeff Stibel, CEO of the Dun & Bradstreet Credibility Corp., told The Associated Press that many owners don't know about business credit. 

"We talk to over 20,000 businesses a week, and a huge percentage of them don't even know they have a business credit file. They think that all they have is a personal credit file," said Stibel. 

Knowing your company's credit score is a massive component of qualifying for a loan. Lenders want to know that your SMB is financially solvent and can pay off its debts in a reasonable time frame. Perform a credit check before applying for loans to help avoid rejections. If the score is low, you can try to raise it or find an alternative lender like a credit union. 

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Small- and medium-sized business owners are always looking for the best banks when applying for loans and credit. Some financial institutions have strict policies and tight lending standards that make it difficult for entrepreneurs to access necessary capital. As a result, owners must complete open-ended searches to find fiscal assistance, which has become all the more important as the economy shifts between upward and downward trends. Here are two considerations that SMB owners should keep in mind when looking for a bank.

The balance

Many small- and medium-sized business owners prefer to use community banks for their financial needs. Nerd Wallet notes that some independent financial institutions make banking easy for entrepreneurs by minimizing fees and restrictions. For instance, some community banks don't require SMBs to save minimum amounts and others offer free checking. 

The lack of fees is perhaps most appealing to owners. As the economy continues to fluctuate, entrepreneurs want to make every penny count, and banks that don't charge for basic services appeal to budget-conscious tendencies. The savings can grant SMB owners some financial flexibility to invest in their enterprises. 

Unfortunately, there are some drawbacks to working with community banks. According to Bloomberg Businessweek, many financial institutions have increased lending restrictions, making it difficult for SMB owners to access necessary capital. Mark Zandi, chief economist at Moody's Analytics, points out that current lending policies are hurting SMB growth. 

"If community banks are on shaky ground and unable to extend credit, the small businesses won't be able to expand their operations and payrolls," Zandi told the news source. 

SMB owners must carefully evaluate their banking options. Finding an institution with minimal fees and few lending restrictions can help an entrepreneur expand his or her business. 

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The Federal Reserve Bank of New York recently found that limited access to credit is preventing many small- and medium-sized businesses in New York, New Jersey and Connecticut from growing. According to the reserve's Small Business Credit Survey, 49 percent of respondents stated that finances are hamstringing growth. Additionally, 66 percent of owners claimed they were already in the red, but 36 percent of profitable companies also said they couldn't obtain credit. 

The poll shows that 63 percent of credit applications were approved this year, which is consistent with 2012's rate. Additionally, more SMBs "received all of the credit they sought" in 2013 than they did last year. 

Most importantly, the reserve's survey shows that optimism is growing among SMBs in these three states, as only 18 percent of respondents were discouraged and didn't apply for credit, down from 29 percent in 2012. The report indicates that the owners of these companies are more likely to use their personal money as capital than other entrepreneurs are. 

Overall, the reserve's findings show that obtaining capital remains one of the toughest challenges that SMBs face in today's economy. Many owners struggle to find financial institutions that are willing to finance independent companies. 

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Small- and medium-sized business borrowing decreased for the third consecutive month in March. The Thomson Reuters/PayNet Small Business Lending Index dropped to 98.5 from February's 105.4. The latter statistic was "upwardly revised" from 101.3 in the initial report. The consistent drop in borrowing has negated the momentum established when the Federal Reserve began purchasing assets to bolster economic growth. PayNet founder Bill Phelan believes that entrepreneurs are struggling with the unstable market.

"They don't have an appetite to take risk...they must have an opinion that the risks are too great," Phelan told the news source.

Additionally, the index shows that SMB owners are struggling to pay off their debts. Delinquencies rose to 1.6 percent, which marks the first time in three years that the rate increased. In February, delinquency reached a record low of 1.58 percent.

These figures highlight the financial struggles many SMB owners have been facing in recent months. Entrepreneurs are trying to stretch their budgets and avoid taking on extra debt because the economy has been slow to return to pre-recession heights. The index is usually indicative of quarterly trends so borrowing may continue to decrease in the near future. 

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A new report shows that banks were using funds meant for small- and medium-sized business loans to repay money from the federal bailout. According to a study conducted by the Special Inspector General for the Troubled Asset Relief Program, the Treasury created a fund worth $30 billion to increase credit for SMBs in 2010. Of that total, $2.7 billion was distributed to 137 banks which had received financial assistance from the Troubled Asset Relief Program. The report states that the banks then used $2.1 billion "to exit TARP in 2011."

The fund was meant to increase SMB lending by providing low interest rates. However, Cliff McCauley, a senior executive vice president of Frost Bank, claims most banks saw the money as the perfect way to get out of TARP debt. 

"Everyone went in thinking it was one of the ways to pay back TARP. It was disguised as promoting to encourage business lending," McCauley told CNN Money. 

This is only one example why some SMB owners mistrust banks. Fortunately for entrepreneurs, there are alternate means of financing their enterprises. For instance, credit unions are viable options for many SMBs that don't qualify for traditional loans. Additionally, the popularity of crowdfunding continues to grow among SMB owners. 

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