In 2017 if your small business needs a loan it can be difficult to find the right lender, whether to apply to a traditional bank or an alternative finance lender, and the particular type of loan to submit an application. I have researched the business credit market and spoken with many small business financing experts, and written this guide to help you secure a business loan to grow your business into a success. Lending managers recommend that you begin your loan process by answering the questions below to determine which lenders are best for your company. Small Business Loan Assessment – 10 Questions
- How much money do you need to borrow?
- How are you spending the loan proceeds?
- What is the purpose of your business loan?
- How soon do you need the money?
- What time frame will it take for you to pay the loan in full?
- How long has your company been in business?
- What is your assessment of your firm’s financial shape currently? Analyze your reports – Profit & Loss and Cash Flow?
- What is your companies credit score?
- What is your credit score?
- What, and how much value, if any is the collateral that you will use to secure the loan?
The answers to these questions will establish if you should apply for an SBA government bank loan, a traditional bank business loan, line of credit, cash advance or business loan from an alternative lender such as our recommendation for fast, easy to approve and fast to approve business loans Kabbage.com
SBA Small Business Administration Loans
There are several types of programs for business loans that the SBA offers (Small Business Administration), each for a particular kind of financing need of small businesses. Each loan type has its approval criteria and conditions for the use of loan proceeds. While SBA loans are referred to as government-backed loans, the government is not lending your small business money. Instead, it is partnering with banks, organizations for community development and micro lenders to facilitate capital for small businesses to spur economic growth in America. The SBA guarantees these loans. Thus it reduces the liability and risk for these institutions, so they are more lenient in credit approval. Pros of SBA Loans Because the US government guarantees up to 90% of the loan amount will be repaid lenders are more apt to approve your business loan application. In many cases, these SBA loan applicants would be denied if not for the small business administration guaranteed repayment. SBA loans are an excellent option for startups, companies with owners with less-than-perfect credit scores. Additionally, the terms and fees are more advantageous for small business borrowers than other types of loans. Cons of SBA Loans Additional paperwork and documentation need to be completed and submitted plus there are extra fees that must be paid before the loan is funded. Also, the process from application to loan approval is longer than other lending sources. Kabbage makes online business Grow. Sign up with no obligation today!
Traditional Bank Business Loans
Conventional loans from traditional banks have funded American businesses for generations. The difference between a conventional business loan and an SBA loan is that the bank is not guaranteed repayment from the government. Thus applicants do not need to adhere to the strict loan proceeds usage that SBA loans demand. Pros of Traditional Bank Business Loans The greatest advantage of conventional bank loans is that they often have much lower interest rates and the process from application to approval is often quicker than SBA loans. Cons of Traditional Bank Business Loans Be aware that these business loans normally have much shorter periods for repayment then SBA guaranteed loans and sometimes have large balloon payments at the end. It can be quite difficult for many small businesses, and entrepreneurs, to get approval for a conventional business loan. Typically, only 20% of loan applicants get approved by bigger banks, and small banks grant more requests, but still, only 50% of applications are granted a business loan. >>Save on Legalzoom 10% with promo code BEST4B – Read Legalzoom reviews
Alternative Online Lenders for Small Business Loans
This option of online lenders has been a real benefit for small businesses to have access to financing and business loans. This applies especially to those companies who do not yet have an excellent financial history since their approval criteria are more lenient than other lenders. The applications are completed online, and approval decisions are sometimes made within hours and you get money in your bank account often in less than a week. Compare that to the standard bank loan that can take up to 60+ days from application to approval and funding of business loans. There are two types of online lenders, direct lenders which offer loans to small businesses and marketplace lenders which offer companies many loan options from multiple lenders. Direct lenders include Fundation, Kabbage and OnDeck Capital. Based on my in-depth research and positive customer reviews we recommend Kabbage – Read my in-depth review of Kabbage.com Websites that are lender marketplaces are BizFi and Biz2Credit. Pros of Alternative Lenders for Small Business Loans The greatest advantage of getting business loans from alternative lenders is that you or your company does not need perfect credit or financial reports. There are few regulations on how you can spend the money you borrow. Plus your business loan can be approved seemingly instantly. Cons of Alternative Lenders for Small Business Loans The loan interest rates are often higher than those charged by traditional banks. However, most small businesses would be unable to get a traditional bank to approve their company for a business loan. Thus the higher interest rates become only a cost of obtaining capital to grow your business. The fees are higher because these lenders take greater risks by lending to new start-up firms and people with less than perfect credit ratings. Need ideas for small business – try our Business Idea Generator for inspiration Easiest Business Ideas to Start Ideas for Women to Start Their Own Business
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