21 Feb The Truth About Small Business Loans
Should You Get A Small Business Loan?
As a mentor to small business owners I am often asked if they need to get a small business loan and if so, how to get small business loans. It seems that information regarding how to get a business loan and where to get a small business loan from isn’t that easy to find. Often the business owner gets conflicting and confusing information and gets frustrated and isn’t even certain if a business loan is the best decision for their business.
Many experts are saying that it is easy for small business owners to access business loans in todays economic climate. Yet business owners I speak with say they have had great difficulty getting loans. This is why I decided to address this issue and I take this dilemma seriously.
Clearly every business owner must have adequate funding for their business. What I find is that my clients seem to use personal funding such as their savings, retirement, or financing from family and friends rather than loans from banks, or lines of credit, or bank loans, or funding from the Small Business Administration https://www.sba.gov/(SBA).https://www.kickstarter.com/
I don’t believe using your savings or your retirement is the best advice if there are alternate means to fund your business. I always advise that my clients look at the other traditional sources for getting a small business loan. I also suggest the new funding sources such as peer-to-peer lending websites like https://www.upstart.com/ and crowdfunding websites such as www.kickstarter.com.
Always Begin At The Bank
I always suggest my clients apply for a bank loan first as banks have the lowest interest rates. I recommend my clients check the rates at their local banks as well as credit unions as their very first options. Bank loans can be more difficult to obtain if finances aren’t in tip-top shape. In this case I suggest that my clients look into SBA loans. While SBA loans aren’t the quickest loans to acquire and are paperwork intensive, they are typically low cost and a business can qualify a lot easier for an SBA loan than they can for a bank loan as the SBA doesn’t require the same amount of credit history as a bank does. So the bank is my first choice and the SBA is my second choice.
Small Business Loans for Women
For my clients who are small business owners and females seeking a loan, they have more choices. If you are a women who owns a small business there are many on-line options that you can take advantage of as well as some government grants, too. The on-line service that I am most familiar with and have recommended for many of my clients is https://www.kabbage.com/. Kabbage is for women business owners who don’t have great credit and Kabbage approves lines of credit not just based on credit score. Kabbage also takes into account banking and e-commerce information. The approval with Kabbage is very quick. The drawbacks to Kabbage are that the APR is high and the loan term is only 6 months.
Small Business Startup Loans
Starting up a small business and financing it is one of the most difficult tasks. You might have the best ideas for a business and still a bank won’t give you a business loan. You also may not qualify for a bank loan without a strong credit history. Banks consider startups risky and banks also want evidence of a businesses success and track record. Banks are looking for certainty that they are going to get their funds paid back.
If you are in the situation where you are need a small business startup loan I suggest looking at https://www.accion.org/. Accion helps small business owners get the financing they need to achieve their business dreams. Accion also gives advice to help a business owner launch their business successfully. Accion says they help business owners become “loan ready”. Accion’s website says they can help with funding for:
buying or leasing equipment
financing any of the many expenses involved with being an entrepreneur
If you are a startup and in need of funding I suggest you check out their website.
Summary: How To Get A Small Business Loan
Now that you have more of an understanding about small business loans here are the basic steps you need to know so you can secure a small business loan. You should also speak with your accountant and your financial advisor for advise as well.
Keep the following in mind when working on getting a small business loan:
- Build relationships with lenders in advance. Get to know the lenders in your area. Do this in advance of when you think you need the money. People do business with people they know. People also lend money to people they know.
- Be clear on exactly what you need the loan for. What do you need to finance? If you want to finance more losses most likely you will be denied. Be very clear on what you are seeking funds for. If you need equipment or software you stand a much better chance of receiving a loan than if you ask for a business loan on non-essential business needs.
- Be very precise in the amount you need. Ask for the amount you need and don’t under estimate what you need nor overestimate. Spend a great deal of time coming up with your budget and create profit and loss statements to back up your numbers with solid data.
- Before you go to any lender know your credit scores. 650-700 is usually acceptable and yet doesn’t guarantee you will get a loan. Many lenders want to see numbers in the 700-800 range and those numbers still don’t guarantee a loan.
- Review the types of lenders I’ve discussed and pick the one that meets your business’ financial needs.
- Apply and wait for an answer. Don’t be afraid to check up on your status.
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