6 Tips For Choosing Small Business Lenders
It’s very common for small business owners to look to lenders to help them finance a variety of business expenses. But finding the right lender can be a challenge all on its own.
How to Find The Right Small Business Lender
Small business owners in all niches often face the difficulty of choosing the right business financing lender. You want to be certain that the lender you select is reliable and will be able to help you with all of your business needs.
To streamline the process, consider the following 6 tips when choosing small business lenders:
Check out their Better Business Bureau rating
Look into the lender, and see if they’ve got any accolades that they can boast. The Better Business Bureau (BBB) offers ratings on various companies, including financing firms. If you see an ‘A’ rating, then you know you’re dealing with a reputable company. Anything less than that should be considered with caution.
Find out if the lender is part of any other financing groups related to your needs, and determine if they are recognized nationally by any awards or magazines.
Find out how flexible the lender is
You already know that banks aren’t exactly the most flexible entity when it comes to loans. They usually expect consumers to have stellar credit, loads of collateral, and a lengthy business history. They may not necessarily finance super-expensive equipment, either. Ideally, the lender you work with should offer some level of flexibility to make the lending process as hassle-free as possible.
Do background research on the company
Speak with friends and acquaintances who may have used alternative lenders for their financing needs. Do an online search of honest reviews about various lenders to get some feedback. Since everyone has a different situation, you’ll most likely get a variety of perspectives. Use your discretion and good judgment.
Compare lenders
Don’t just look at one lender. Instead, find a few of them and make some solid comparisons. What is their average interest rate? What programs do they offer? How long are their term loans?
Work with a lender that offers exceptional customer service
One of the most important aspects of a lender – as well as any other type of company – is the level of customer service they offer their clients. Ideally, they should make themselves easily available through a variety of channels of communication, including by phone, email, or live chat.
The best lenders are those who score a 10 out of 10 in all areas of question.
Get Started with The Right Small Business Lender
They should have staff who are highly knowledgeable, friendly, courteous, and professional. Financing can be a stressful process, so you want to make sure that the lending company is patient and helpful.
Identify the types of loans the lender offers
Ideally, the lender you decide to work with should have a variety of financing programs that they offer consumers. No two businesses are the same, nor should the loan option be. As such, you should have your pick of the litter when it comes to the types of loan programs to use, including the following:
- Business Cash Advance – While not necessarily a “loan” in the traditional sense, a business cash advance can provide you with the money you need to cover a variety of business expenses. After receiving the advance, the lender will take a certain percentage of your daily credit card sales as your method of repayment. Since the amount you pay is a direct reflection of how much you make in daily credit card sales, your payments will vary. In this way, you’ll pay more during busier months, and less during slower months.
- Invoice Financing – A common issue that many small businesses face is the delay between invoicing customers and suppliers, and actually receiving payment. During these gaps in payment, your working capital can suffer. With invoice financing, the lender will buy your invoices and advance you about 85 percent of the funds. The rest of the money is kept in reserve, which the lender will tap into to take their associated fees. Once the invoices are paid, you receive the rest of the money that’s held in the reserve funds.
- Short-Term Business Loan – Much like a traditional loan, your lender will provide you with a lump sum of cash for you to use for a variety of business purposes. You then promise to pay back the loan, along with added interest payments. There is usually a fixed repayment time period, as well as fixed regular payments which are usually made daily rather than monthly (like a long-term loan). The amount of money funded is typically much less than a longer-term loan. Short-term loans are best suited for situations where you need quick cash to cover an operational hiccup here and there.
- Business Line of Credit – These work similar to a credit card. You’re given access to a specific amount of money that you can withdraw any time you want. You can use this money in whatever way you see fit, and you are only charged interest on the amount you owe. As you put that money back into the line of credit, you’re free to use it on a revolving basis.
- Equipment Financing – Rather than affecting your cash flow to buy your equipment, you can finance it instead and leave your working capital alone. With equipment financing, you’re given a certain amount of money to pay for various pieces of equipment. The loan is then paid back, along with the lender’s fees, until the entire loan is paid off in full. Once you’ve made good on your promise to pay the lender back, the equipment is considered all yours.
Helping You Choose the Right Lender For Your Business
It can be a daunting task to sift through all the lenders out there before settling on the right one. At Credibly, we can help take the guesswork out of choosing the ideal lender to work with you.
Contact Credibly today for all your modern business funding solutions! Or to get started, fill out our online pre-qualification request form. It’s free and easy and won’t hurt your credit.