It’s tough to earn a profit right away. You need options to finance the shortfalls in your business’s cash flow so you can get by during hard times. Until your business supports itself, the best way to fund your project is through crowdfunding, using your personal savings, working with angel investors, or getting a loan.
The size and type of business determine the best source of funding. If you have a prototype, a unique tool, or a design, crowdfunding is a great way to build hype. If you have been in business for a couple of years already and need to expand, a business loan may suit you better.
How to Get a Small Business Loan
There are four types of loans available for your small business: Commercial loans, equipment loans, SBA loans, and standard business loans. Each has its own set of benefits. Before you apply for any of these types of loans, prepare your information beforehand. You need a business forecast, expense records, and proof of revenue.
Also Read: Alternative Business Funding Methods
You should expect the lender to ask for reports on your cash flow, industry risk, and your experiences with running your business. Lenders want to make sure they give their money responsibly so that they get their money back.
The better you can prove that your business has an upward trajectory, the better your chances at getting the loan. Do what you can to make your personal character look good as well. The person running the business needs to be responsible and have a credible history.
What Type of Lenders Should You Borrow From?
Large banks don’t typically loan money to small businesses because it’s not worth their time. The payoff isn’t very good, and the risk is high. Your best option is to find a small bank, a local bank, or an alternative lender.
Small banks and local banks have a vested interest in the community so it could be beneficial to develop a relationship with other local business owners. If you already know the owner, it could improve your chances. If you don’t already know them, it may help to get to know them.
An alternative lender is another excellent option, especially if you don’t want to burn bridges or exercise that local relationship muscle just yet. Alternative lenders typically require less paperwork, have less stringent requirements, and can get you approved much more quickly.
Types of Business Loans
Commercial loans can help you if you already have equity in your business. They have a more aggressive repayment strategy, so if you’re struggling with cash flow, it’s not the best option.
Also Read: 7 Ways You Can Fund Your Startup
Equipment loans are helpful if you need large, expensive equipment to run your business. You can use the equipment as collateral, and you gain equity in your equipment as you pay it off.
The Small Business Administration offers SBA loans with less aggressive repayment requirements, and they can be used to purchase locations, equipment, technology, or for extra funding.
The government doesn’t back conventional loans, so they put the lender at more risk. A small business may not have a great chance at getting a commercial loan. If you do qualify, you can negotiate for better terms with your lender.
Alternative Lending
It’s typically much easier to get the funding you need through an alternative lender. Applying for small business financing online is fast and easy. The requirements are less stringent, and you can be approved in as little as a day.
While the repayment terms may not be as great as some of the other loan options, it’s easier for small businesses to qualify and you’ll get the money you need faster. Check out Quick Loans Direct for all of your small business funding needs.
