How to find the best small business loan

You’ve been running your small business for a while now and it’s time to expand. But of course, like most new things, It requires capital. Something you might not have enough now but if you were able to implement the expansion you’d be able to return, at least, three-fold. In this post, I wanted to share with you some options for getting the extra funding you need for your small business.

Here are a few of the reasons small business take out a loan:

–To purchase real estate

–Renovations

–To purchase inventory and stock

–New employees

–Buy new equipment or machinery

–Increase working capital

–An opportunity that is too good to pass up

–Increase advertising and marketing

–Buy a competitor out

–Move premises

–Pay staff

–Pay BAS or Tax Payments

OPTIONS:

Banks

Traditional brick-and-mortar banks are still your best option for borrowing the largest amount of money at the lowest interest rates. They may also offer longer repayment terms if you need them. Sounds fantastic, but these loans require a lot of collateral and care known to be extremely hard to secure. Application and approval can also be daunting — you’ll need to complete a slew of paperwork, put a large deposit down, and possibly wait a few months to see any money.

Credit Unions

Rates are competitive and sometimes lower since credit unions are nonprofits with less overhead. You’ll need to be a member, though requirements are often as simple as living in a specific area or having a particular occupation. Note that though credit unions may be more flexible than big banks, they still primarily lend to established businesses.

Alternative Finance Lenders

It’s not easy to obtain a small business loan from traditional banks or credit unions. You’ll usually receive a lower interest if you even qualify . But if you’re like the majority of small businesses, you may come up empty. The good news is that a number of online alternative finance lenders work directly with small business owners. In many cases, they make the lending process a lot more quicker, convenient, more transparent and have a more flexible lending criteria. The advantage of going online is speed: Most lenders can get you your money in a week or less.  Another positive of working with an alternative lender are that your business doesn’t need to have a perfect financial status, there are few restrictions on what the money can be used for.

Peer-to-peer Small Business Loans

These types of loans directly connect borrowers with several investors who typically fund small chunks of diversified portfolio. While this option might not be the best low interest business loan opportunity, lending criteria is usually less stringent than it is at traditional brick-and-mortar banks.

Business Credit Card

Best used to purchase consumables and to help smooth out fluctuations in cash flow. In reality, you can use it for whatever you like. They’re convenient and a flexible source for emergency cash flow, however interest rates can be very high and can incur considerable fees and charges when not used. This is seen as more of a short-term option.

Borrow from friends & family

Family members and friends who like your business idea may be willing to lend to you. Usually those startup business loans have very favorable rates and repayment terms. However, if things go a bit awry, you risk not only the loan, but your relationships.

Crowdfunding

Crowdfunding is raising small amounts of money from a large number of people. This is almost always done through some kind of crowdfunding website, such as Kickstarter or gofundme. Many entrepreneurs use this type of crowdfunding to initiate pre-sales of new products and gain exposure. However, there is a lot of administrative tasks to get through to set up.

Angel Investors

Angel investors are usually wealthy individuals who give your business money debt-free in exchange for an ownership stake or equity in the business. An angel investor invests as much in you as the business owner as they do in the business’s products or growth opportunity. Angel investors generally give less money than VC’s, but they also are less likely to take an active role in your business. Raising money from angel investors is all about networking – so getting funding this way, requires you to get out there!

Venture Capital

Venture capitalists are basically investors who are looking for a very high rate of return for their money. Most new businesses cannot guarantee such a high rate of return, which is why they are often not a good match for venture capital funding.

As you can see, there are several options, which can make the decision which one is best difficult. Before committing to a loan, consider the following:

–Figure out how much you need and how you want to repay – Some borrowers find making a large payment every month is a greater burden on their business than weekly or daily payments.

–Speed to access funds – when will you need to use the funds?

–The fees and interest you will pay – in the bigger picture, are the terms offered really worth it?

–Get Your Personal and Business Finances in Shape – Before you apply, you’ll want to make sure your personal and business finances are in shape. Lenders will also want to see a strong business plan, which will normally include financial statements, such as balance sheets and cash flow, and tax returns. A great business plan should act as a pitch for your business and convince a lender to give you money.

–Shop around.  When you’re ready to apply, it’s in your best interest to shop around. Based on how much money you want and when you need it, different lenders will be better than others. If you go through a comparison site, they can compare for you.