Small businesses are navigating unchartered waters right now, and many are turning to loans and lines of credit to get through mandatory and self-imposed closures. Before making a decision and submitting an application, there are key pieces of information you should know about government, bank and SBA loans.
What Are the Most Common Types of Funding?
There are many routes you can take when your small business needs an influx of cash. The right type of loan will depend largely on how you plan to use the funds, your desired repayment terms and whether you know exactly how much you will need or the amount is in flux. A few options you might consider include:
- Working capital loans
- Small business lines of credit
- Business credit cards
- Accounts receivable financing
- Equipment loans
- SBA loans
- Commercial term loans
Where Can You Turn for Business Financing?
Small businesses have more financing options now than ever before. Peer-to-peer lending sites link businesses with individuals or groups looking to invest and might be a good source for immediate financing needs. Online commercial lenders can also help you find the best package for your needs from among a pool of qualified banks and finance companies. Don’t assume that your local bank cannot compete with online or large commercial lenders, however. If you have a relationship with a local bank, then use that your advantage. They probably already know something about your business, its structure and finances. Plus, banks that are affiliated with the Small Business Administration offer SBA loans that carry very attractive rates to help lower your overall cost of borrowing.
What Will Lenders Look at When Making a Decision?
Each lender will have their own criteria for making a small business loan. In general, you should plan to provide the business name, structure and date of its formation; names and contact information for all officers and board members; financial statements for the previous two to three years, plus projected ones for the current year; the amount of money you want to borrow and any collateral you plan to use to secure funds; and recent tax filings and bank statements.
Many small businesses use loans and lines of credit to help sustain and grow over time. The more you know going into the process, the better positioned you will be to find a financing package that suits your needs and goals. Keep in mind that you don’t necessarily want to jump on the first loan offer that is made. Carefully consider the amount offered, structure, and repayment terms before making a decision.