It used to be that the only place you could get a loan was from a bank. This didn’t and still doesn’t bode well for people without favorable credit. For business owners, you must also have collateral to back up your financing request, and if you’re just starting out, you probably don’t have that either. All is not lost, however. Entrepreneurs have found some wonderful ways to finance their ideas over the years, and the business of small business loans has moved out of the bank and into several other options.
The Small Business Administration was enacted by President Eisenhower in 1953 with the sole purpose of helping smaller companies get off the ground and stay in business. Alongside providing essential advice for starting and managing your business, the SBA also offers loans through various lending programs. This financing is designed for small businesses and provides financing in lesser amounts than big banks at lower interest rates. Many lenders will also consider your loan request even if you don’t have a big-business credit rating.
Nonprofit Micro Lenders
There are nonprofit organizations out there whose mission is to help small businesses. Many can be found through the SBA and others are local to your community. Microloans are generally $50,000 or less, making the payback more realistic for a smaller corporation. Many nonprofits are specific to a business sector, so if you’re opening a software company for example, you might find a micro loan designed to meet your specific business needs.
There’s a new catch phrase in business financing and it is alternative lending. Alternative lenders are found online, and they provide small business loans through numerous options, including:
- Merchant cash advances, where a financer loans you money against your future debit and credit card sales;
- peer-to-peer financing, where you might find those in your industry willing to provide a loan for your needs.
These options work well if you need money quickly. Keep in mind, however, that they do come with higher interest rates than traditional loans.
Bootstrapping might sound like a phrase from the Old West, but what it means is that you are financing your business venture with your own assets. Small business loans don’t necessarily have to come from banks or any other financer. If you have a strong personal portfolio, you might be able to finance your business venture yourself. Once your business takes off, your payback will exceed any loan you must remit to another, and there’s nothing more gratifying than financing