To get a small business loan, first identify the best lender for the business. This may be a bank, the Small Business Association, peer to peer lenders or crowdfunding sites.
There are many reasons why a small business would seek a business loan. It's a great way to get an infusion of money to help grow operations, including funds for working capital or funds towards required equipment and tools. There are a wide variety of options when it comes to business loans including traditional lenders such as banks as well as modern options like crowdfunding.
The SBA Loan, also known as the Small Business Administration Loan, is funded by the federal government and is one of the most popular sources of loans for small businesses. These loans can be used towards commercial mortgages, purchasing equipment and more. There are several different types of SBA loans, like the 7(a) Loan Guarantee Program and the MicroLoan Program, according to SBA.com. The differences between the loan programs are primarily based on the purpose of the loan, as well as the loan sizes. To learn more about the SBA Loan and to apply, visit the local SBA office.
Traditional bank loans work best for traditional business with collateral and established credit. However, it can be difficult to be approved for bank loans, because banks consider small businesses to be a risky proposition. The process can last months, sometimes up to six, according to NerdWallet. This can be too slow for some business' needs. To apply to a bank loan, meet with a bank loan officer to learn more.
Peer to Peer Lending
Peer to peer lending programs offer an unconventional way to secure small business loans. However, these loans tend to have very high interest rates, although many businesses accept these terms to get the cash flow they need. There is a wide variety of peer to peer lenders, all of which have varying degrees of requirements. Most of these programs have simple, online application forms. Before accepting any of these loans, make sure the terms and total repayment are understood to stay on track.
Microloan lenders focus on giving small businesses small loans of up to around $35,000 and less with short terms, states NerdWallet. These lenders require a business plan and income information but offer options for people with bad credit or help for businesses that are less established. The loans are disbursed quickly as well. Microloan lenders offer simple, online application forms.
Crowdfunding sites offer small businesses a chance to reach out to the online community for help in reaching its goals. There are several types of crowdfunding sites, each with its own strengths. For businesses selling an innovative product, Kickstarter is the best option. In exchange for donations, small businesses promise incentives, which range from small gifts to the finished product. On the other hand, GoFundMe is a great platform for small businesses that need a boost, would like to open a storefront or have very specific needs, such as funds to repair broken equipment. To apply for crowdfunding, fill out the online forms.
In some cases, the business is too small or too early in its growth to qualify for a loan. However, there's still the option of taking out a personal loan, which can then be applied towards business expenses.