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Business Lending Options You Should Consider

business lending options you should consider

With the right funding, your business can grow, thrive and prosper. But, navigating yourself through rough waters to reach that success can be difficult. You must find the best small business loan option available to fit your business needs and provide solutions. Rather than trying to conform to your loan, it is often best to find a funding option that conforms to you and your business.

You need to explore all the lending options available to you, and there are several different small business loan products to choose from. Some will be a better fit for your business than others because each product has its own set of qualifying criteria, payment schedules, risks and benefits.

According to aboutmoney.com, there are obvious lenders (banks and the Small Business Administration) to consider and the not-so-well-known lenders (alternative lenders, and credit unions) who can offer easier solutions with a greater focus on you.

 

Where to begin

The bank may be the most obvious choice, but according to foxbusiness.com, it is very difficult for a small business owner to qualify. Banks look for excellent credit, extensive financial history and collateral. Essentially, if you were in a position where you did not need money, then you would qualify.

Banks tightened their loan requirements after the credit crisis several years ago, focusing their loan products on big business and making qualifying more difficult, if not impossible, for most small business owners.

What you should know:

  • The bank’s small business loans often provide a low interest rate, lower than other funding options.
  • A bank loan will further establish your credit, so next time you need a loan it may be easier.
  • This is not a quick solution. Loans can take 30-60 days to process.
  • If you have had credit challenges and ups and downs in your business, are a start-up or lack valuable collateral, this is not the best choice in loan options. You typically need an excellent credit score and credit history to even be considered.
  • The bank requires an extremely detailed business plan. They want to know everything about your business, marketing plan, and your tax and bank records. The process is rigorous.

 

Seeking a Small Business Administration Loan

The Small Business Administration (SBA), is a government agency created to help small business owners like yourself. It can be helpful for some, but once more, you must be able to meet their qualifying guidelines and you should be prepared that the process will take even longer than with a bank.

The SBA offers several loan products, general purpose 7(a) and 504 loan programs, for special purposes and business needs. The loans can cover start-up costs for a business, expanding your business or cash flow to keep a business running smoothly. The SBA does not issue the funding, but rather connects the borrower up to one of their lending partners.

What you should know:

  • They typically require good credit and some collateral and are great if perhaps you are close to qualifying with a bank, and just barely missed approval. The SBA loan programs are known to lend to small businesses unable to secure financing on their own through the typical bank application.
  • The loan programs are provided through private-sector lenders and are guaranteed by the SBA, which is why qualifying is slightly easier than approaching the bank on your own.
  • The interest rate is usually low, but your loan will take more time to process because you are satisfying both the SBA and a lender. You may wait up to 90 days or more to get your loan.
  • Your credit history, managerial and business experience, your overall business plan, and even your basic work skills can be scrutinized in the decision process for the loan.

 

Credit Unions

Credit unions are much like a bank, but are privately owned by their customers in a nonprofit status. They offer small business loan products comparable to a bank, but they often make it slightly easier to qualify.

What you should know:

  • Much like a bank, credit unions scrutinize your credit score, collateral and business plan, though the bar may be set a bit lower than at most big banks.
  • You must be, or be willing to become, a member of the credit union. This means opening accounts with them and meeting their member qualifications.
  • The loan process can make you wait 30 to 60 days for the money.

 

Alternative Lenders

Alternative lenders are the leading way most small business owners find a loan product that fits their needs today. They are a great fit for successful, established businesses as well as young, expanding or entrepreneurial start-up businesses. According to cnbc.com, even franchise owners, who face extra challenges in obtaining a loan, are finding a funding solution through this avenue of business lending options.

Alternative lenders offer several funding options including small business loans and merchant cash advance programs with a focus on ease in the qualification process, speed in getting you your money, and flexibility in the terms and repayment schedule.

What you should know:

  • If you lack excellent credit and need someone to see your business potential, this is a great solution. Alternative lenders offer small business loans with less stringent requirements and a faster application process. Some programs can get you money in hand within days.
  • You can expect to pay a bit more in interest, but the trade-off is qualifying and getting a great loan with speed and ease.
  • Red tape is removed. You do not need heavy amounts of financial documentation and lengthy details on your business plans. The application and approval process is easy to do, and is usually completed online.
  • Some solutions offer flexibility in the repayment schedule that takes into account your sales volume fluctuations.

 

Conclusion

There are several small business funding solutions available to you. To learn more about creative business lending options, contact Credibly today!