Alternate Solutions For Small Business Finance
The most significant challenge a startup faces today is getting the small business finance they need to get going. So which type of small business finance is best? Considering there are many funding options for businesses, including startups trying to obtain a bank loan, you don’t need to settle for traditional bank loans. Since every business is unique, the best loan options for you might not be the same as other companies in your industry or your competitors. It depends on your needs, goals, specific requirements, what kind of business you are running, the company’s size, credit score, location, your risk level, and any other factors unique to your business.
Six alternate small business finance options discussed below:
- Term Loans
- SBA Loans
- Unsecured Business Credit Cards
- Venture Capital
A type of small business finance option is a term loan. It’s a form of financing with which you get a lump sum of cash upfront, which you will pay back with interest over an interval of time. You don’t have to apply through a conventional bank, as there are many alternate funding solutions. A terrific thing about this choice is that if you qualify, you’ll get the cash upfront to invest in your business. The downside is you may have to put up collateral, and if you lack a good credit score and are a new business, the interest rate will be higher.
SBA loans have always been popular with businesses, offering some of the cheapest rates and repayment terms. The repayment period is dependent upon how exactly you intend to use the money. If it’s for real estate purchases, you will have a longer duration of time to pay the loan back. Suppose you want cash as soon as you can; then, an SBA loan is not the best choice because the application process can be long and rigorous. You also don’t have any guarantee your application will be approved.
Microloans are an illustration of an alternative financing solution. While typically earmarked for non-profit organizations, people who wouldn’t ordinarily be eligible for a bank loan might still receive funding from lending organizations that are microloans.
Unsecured Business Credit Cards
A business credit card can come with some great benefits. They are typically unsecured, so you won’t need to place collateral. But, to qualify for the best terms, you will need to have a high credit score already, and you might end up paying additional costs such as maintenance fees and draw fees.
Another sort of funding to look for is venture capitalists. Angel investors have money to invest and want to invest in young, up and coming companies that can demonstrate a high potential for monetary returns and growth. They look for a share of equity in exchange for their investment. VCs will expect to make money on their investments, so they might want to have some control over the business.
You’ve likely heard of crowd-funding, where startups can make a campaign to help raise money for products or their services. While this option can be useful, it’s not simple to reach your financial goals in the period in which you need the money. You’re going to have to have a genius marketing program that will attract much attention from people who have the money.
Three other business funding options to consider:
- Purchase order funding
- Equipment loans
Other independent organizations offer small business loans for new businesses. There are a few scams, so you must ensure that you’re getting involved with a legitimate business. Spend some time reading over all the terms and conditions. If there is anything you don’t understand, seek clarification. Ensure those terms and conditions are right for you and your business needs. Whichever source you go through should help you, not hurt you.
Now that you know more about alternative lenders and online funding options, you might want to check with Global Commercial Business Finance at https://gcbfinance.com. They have an 85% approval rate for a small business loan for new business endeavors and startups.