Small Business Loans: Where to Find Them
Small businesses, particularly startups, can experience difficulty securing the cash flow necessary to launch or maintain operations. Rigid qualification standards can preclude fund allocation and leave companies in dire financial straits. Fortunately, SBA loans provide viable options other than the traditional bank route.
Small Business Administration
Small Business Administration loans bring with them guaranteed risk reduction. They can provide viable, long term and economical capital opportunities for companies with credit histories too sparse to qualify for bank approval. Due to its government support, the SBA is assured of getting at least a portion of funds back, even when defaulting occurs. There are several choices available, and many deliver longer repayment terms, reduced fees and laxer requirements. The SBA serves as an indirect lender, while credit unions and banks actually issue the finances. This partnership allows higher risk establishments an increased chance of approval.
Because applications for SBA loans require extensive documentation, the process can be lengthy and time consuming. Small businesses looking for a quick fix may not be able to wait, as timelines may take upwards of three weeks.
Other Financing Alternatives
Some business owners may opt to make personal investments. They may use money advanced from friends or family, dollars from retirement accounts or personal savings. Depending on the circumstances, these investments may prove risky.
Banks are generally the most traditional route. Because they may have more extended repayment timetables and lower interest rates, they are often viewed as a safe route. However, they are often more difficult to attain than SBA loans due to their rigorous qualification measures. They also tend to lend more often when finances are in ideal condition.
Credit unions typically approve more reputable businesses, and generally offer up to two times the lending rate of large banks. Unlike other routes, however, membership can apply.
Government grants may be an option for research or science oriented companies. Invoice advances can help to ensure constant cash flow by advancing money on billed invoices. Angel investors and venture capitalists may be of assistance to businesses in the beginning stages of development. Web based possibilities such as crowdfunding often source support from a number of investors, while online loans can deliver fast solutions with more flexible standards.
The SBA Difference
The right choice can depend on individual financial situations, goals and business models. Owners can benefit from examining the terms and details of each possibility. Quick service may not mean an ideal annual percentage rate. While many options exist, SBA loans may prove the most promising. Due to their guaranteed government backing, they can offer lower rates, less stringent application requirements and ultimately reduce risk.