Nowadays, there are many ways to get financing for your business from both traditional lenders and alternative ones. In this article, we look at 10 smart ways you can get a small business loan.
1. Get a conventional bank loan
Despite the myriad of loan options, the traditional bank business loan remains the most popular choice for most entrepreneurs, and for good reason: its low interest rate and relatively long repayment period.
Bank loans are not easy to qualify for but if you are not in a hurry, your business is solid, and you have an attractive, fact-based estimate of your future revenues, a bank loan is one of your best options.
2. Secure an SBA loan
Like traditional bank loans, SBA loans are hard to qualify for. However, SBA loans offer the most ideal loan terms, so make sure to take them into consideration. Getting an SBA loan instead of another kind of loan can save you a huge amount in interest!
3. Try smaller banks
Community banks and other small banks are typically more flexible than big banks when it comes to their lending standards. It is also easier to build rapport with their loan officers, making it more likely that your loan application will be approved.
4. Consider small business credit cards
With a small business credit card, you can provide short-term financing for your business. You can also get cash bonuses, travel perks, cashback, and other benefits when you use the card to purchase things. In addition, some credit cards have introductory rates of 0% for the first several months.
5. If too much money is tied up in invoices, leverage those invoices
If too much capital is stuck in the form of accounts receivable, you can improve your through invoice financing (aka accounts receivable financing). With this form of funding, you can secure immediate capital from a lender, which you can pay back as your customers pay the outstanding invoices.
6. Explore lenders that connect to online business data
There are thriving businesses whose credit scores do not meet the requirements of traditional lenders. If your business is one of them, consider Kabbage and other automated platforms that connect to bank accounts and sites such as Amazon, PayPal, QuickBooks or Square to gauge the borrower’s business health when approving loan applications.
7. Crowdfund through peer-to-peer (P2P) lending
With P2P lending, the money is funded by a pool of lenders that each contribute a portion of the loan. These lenders get their money back, plus interest, when the borrower pays.
8. Borrow a small amount to prepare for a bigger loan
The problem some businesses have is insufficient credit history. Without a record that you are responsible in handling your financial obligations, lenders may hesitate when you decide to for your business. To prepare for this big event, you can beef up your credit history by getting a small loan and paying it back on time.
9. Improve your credit report
Many lenders check your when evaluating your loan application. Thus, before submitting any application, first get copies of your credit reports. Have any wrong information corrected and try to remedy any credit mistake you made in the past.
10. If you are in a hurry or have poor credit, check out alternative lenders
Many alternative lenders will still lend you money even if you have bad credit and no collateral, or don’t have the time and patience to go down the traditional route. The downside to the ease and speed of getting such loans is a higher interest rate, so make sure you actually need the loan and can pay it back on time.
The bottom line
With a wide range of small business loans available to interested business owners, choosing the best one can be confusing, so do your due research and secure a business loan in a smart way.