A Quick Guide to Small Business Loans
Even if your business is wildly successful, there will come a time when you will need additional small business financing. There are a number of options available to you beyond a traditional financial services organization. Some might better serve your financial situation. Here are some choices you have:
Work with an Online Lender
Some small businesses find that working with an online lender can yield better rates than a traditional bank. Online lenders may choose to evaluate risk in ways beyond credit and FICO scores. Others may have more flexibility than traditional banks because of their makeup. For example, some technology companies operate as a lender outside the financial services industry. If you decide to go with an online lender, make sure you do your research before signing on the bottom line.
Get a Loan from Your Peers
Peer-to-peer (P2P) lending is another alternative to the traditional small business financing loan. In this model, peer investors contribute funds to a communal account. A P2P lending service then determines risk and administers loans to borrowers from that pot. Investors are paid back interest from those loans.
Consider a Working Capital Loan
Another option for small businesses is a working capital loan. These loans are typically meant for short-term business financing needs rather than asset purchases or longer-term needs. These usually come in the form of HELOC loans or lease financing.
Check Out Merchant Cash Advances
Among a number of financing options is the merchant cash advance (MCA). An MCA provides a business with up-front cash. The borrower repays the debt through debits from the business’s credit card receipts. The amount paid is typically a daily debit in an amount agreed upon by the borrower and lender.
What if Your Credit is Bad?
Even with a number of small business financing options available, some borrowers may find that a poor credit rating makes getting those loans difficult. Those business owners should not despair. Possibilities abound for these business owners as well.
Business owners can seek a co-signer with better credit to help secure a loan. Remember, though, that if you default on the loan, the bank will seek repayment from your co-signer. This can damage relationships, so think long and hard about this option.
Putting up collateral against the loan is an option as well. Just remember that if you cannot repay the loan, the collateral will go to the lender. Many small business financing options exist for entrepreneurs. Do your research to find the loan that works best for you.