6 Alternatives to When Your Bank Says No to a Small Business Loan
08 Sep, 2017 / Comments: Comments Off on 6 Alternatives to When Your Bank Says No to a Small Business Loan / By William Mahnic
Banks have stringent requirements that must be met in order to qualify for a small business loan. Many people often think that the only place you can get a loan is from a bank. So, what do you do when the bank says no? The truth is that there are plenty of alternatives to traditional bank loans that can help you to secure the funding that you need to achieve your goals and help your business to grow.
Many people forget that banks are businesses too. They often say no to small businesses that don’t require a significant amount of funding. Banks understand that they can make more money by lending larger amounts than they can with smaller ones. A microloan is targeted towards small businesses that don’t require a large amount of money (many lenders will provide as little as $35,000) and has shorter term limits. They are also a good option if you are just getting started and have little to no credit history. A solid business plan and some collateral can help you to acquire one.
Crowdfunding is a relatively recent alternative to a traditional small business loan and is done online through websites such as Kickstarter and Indiegogo. These sites rely on investors to help you get your business idea up and running. You provide specific perks (such as the goods or services you plan to provide) or equity in exchange for capital. In order to acquire funds with crowdfunding, you need to have an idea or product that is truly interesting and can garner the attention of several investors.
3. Angel Investors
An angel investor is an already successful business person who is looking to invest in, and be involved with, new businesses. They have already made their money and now they are looking to invest in new businesses just for the fun of it. Many want to help others to succeed. These types of investors don’t pick just anyone however. They want to invest in businesses that are scalable and will provide a significant return on investment. They look for small businesses that have an excellent management team, a solid business plan and that offer something unique.
4. Invoice Factoring
Invoice factoring is a type of working capital loan. This type of financing is often used when you have accounts receivable that are slow to pay. You essentially sell your accounts receivable (for a fee) in order to receive immediate working capital. This allows you to continue running your business while you wait for clients to pay. Invoice factoring is often used by small businesses who bill larger invoices.
5. Line of Credit
A business line of credit is another type of working capital loan and is similar to a business credit card. You are given a set limit and you can draw up to this limit whenever you need. The funds become available again as soon as you start paying them off. This gives you constant access to working capital. In order to qualify, you typically need to have a credit score of at least 600 and you need to have been in business for at least two years.
6. Small Business Grants
A small business grant is a way for you to grow your small business without needing to worry about paying back what is provided. Small business grants are often offered by nonprofit organizations, corporations as well as government agencies. Some grants are targeted toward specific small businesses such as those that are run by veterans or by women. The biggest obstacle to small business grants is that everyone wants free money which means getting a small business grant will take time and effort, but can be exceptionally beneficial in the long run.
A no from a bank lender does not mean that you are out of luck when it comes to securing a small business loan. A bank is not the only place where you can secure the finances you need. By doing a little bit of research, you can find the best solution to meet your specific needs with terms and conditions that are often more favorable.