The 5 Best Sources For Business Loans

 



Thousands of small businesses open their doors for the first time each year, but most of them will close doors again within five years. Those that do close usually do so because their owners failed to secure enough capital to finance the business. Sometimes this happens because they simply didn’t know where to go for funding. This doesn’t have to happen to your small business.

Use Your Own Money

The best way to finance your business is with your own money. Consider dipping into your savings account, taking out a home equity line of credit or cashing in against stocks, bonds or mutual funds. Exercise caution when using your own money. Never put yourself or your family into an unsafe financial situation for the purpose of opening a business. If the business goes under, so will your personal finances if you aren’t careful. This includes using credit cards to finance your business. If the spending gets out of control or the company doesn’t become profitable, you will end up with large credit card bills that you might not be able to pay, leading to poor personal credit.

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The 5 Best Sources For Business Loans Lenders

Ask Family and Friends

Here are the 5 best places to find a loan for your small business: Bank Loans. The cheapest source of debt financing for your business is going to be a traditional bank loan or line of credit. If you can get a loan from a bank, you should always go that route. That being said, banks are currently denying around 85% of small business loan. Reading business loan reviews, calling and asking questions, and reaching out to those who started their own businesses will help you find the best lending option for you. All business loan lenders will have different requirements and qualifications, so taking the time to conduct your own research is key to finding the right business loan company. 5 Sources of Small Business Financing Thousands of small businesses open their doors for the first time each year, but most of them will close doors again within five years. Those that do close usually do so because their owners failed to secure enough capital to finance the business.

Few people like asking for loans from friends or family members, but if you know of someone who has the money to invest and would be interested in your idea, it is worth considering. They probably won’t charge you interest, which means you’ll save money when it comes time to pay back the loan. You might also consider bringing a family member or friend on as a partner so they know they will get a return on their investment if the business does become successful.

Traditional Business Loans

Banks are the most common places small business owners go for financing, but they can also be the hardest places to secure funding from. If you go this route, be sure you have a very clear and executable idea. Bring a solid business plan with you and be sure it includes a break-even analysis that estimates your company’s financial obligations and expected revenue to show its potential for profitability. Be able to prove that you’ve researched the costs. Even with a solid business plan, banks often hesitate to fund startups because they prefer to finance businesses that have already proven they make money. However, if you have the ability to put up personal assets as collateral or if you have someone who will co-sign with you, you are more likely to be approved. Alternatively, you could check out the Small Business Association or similar local organizations that offer lending options.

Private Investors

You may be able to find a private individual, company or organization that is interested in your idea and wants to invest in your business. While this works for some, it is important to know that many of these types of investors will expect to be part of the company’s daily operations and decisions, requiring you to compromise about how to run your business. Investors are usually interested in ideas that they expect will have a high return on investment (ROI). This is a good route if your company is tech-related.

Leasing Companies

One way to save money and secure what you need for your business is by leasing your equipment. Leasing companies often provide electronic equipment, such as computers, phones and other office equipment. You can even lease cars if you need to. While this means you pay a monthly bill and purchase your equipment over time, it saves you from spending thousands of dollars to buy outright without knowing if your company will succeed.

There are many ways to secure financing for your small business, especially if you are willing to think outside the box. A solid business plan, knowledge of your industry and an enthusiastic attitude is likely to help no matter where you choose to secure your capital.

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At some point in any growing business, you’ll likely need a loan to cover building and operating costs, capital growth and unforeseen expenses. Fortunately, there are a number of resources for small business loans that can help keep your business on track. Here are five common loan resources for accessible and suited for small businesses to help you make the smart decisions.

Small Business Administration (SBA) Loans

The SBA exists to provide support for entrepreneurs and small enterprises who need financial assistance. As a part of that service, they also offer loan solutions at comparatively low rates. These competitive loans take some time to initialize and the approval process can be lengthy, but once in place, businesses can take advantage of substantial, low rate small business loans with limited credit history. However, they are also long-term loans, so it’s good to have a plan to stay in business for at least the duration of the loan.

Personal Line of Credit

Credit cards are another simple solution to cash flow problems. Opening a personal line of credit for your business can help with startup costs while keeping interest rates manageable. If you have good credit standing, then you can receive decent APRs that are much lower than business lines of credit.

The 5 Best Sources For Business Loans Bad

Bank Loans

For more traditional small business loans, you can take out a bank loan. Banks are often able to give some of the lowest interest rates available, given their access to regular cash flow. However, you do need to have a substantial credit history and sound finances. This can be difficult to achieve as a new business when costs and liabilities are high and profits are low.

Personal Investment

The 5 Best Sources For Business Loans Guaranteed

Acquiring a personal loan is a viable, but risky option for some business owners who have the means. Whether they put up their own money or borrow from friends and family, you are entering into an agreement with little security. Should business go south, you or your investor will be left with an unrecoverable loss. Generally, personal investment should be limited to only what you can afford to lose.

Alternative Financing
Finally, some business owners use commercial lenders to secure small business loans. These companies tend to loan to borrowers with low credit standings or who are unable to receive traditional loans. The also offer fast capital. However, they often come with very high interest rates and short terms.

Securing the funds you need to start or run your business is not impossible. Start your search for affordable business lending today.