A small business loan is the fuel that allows you to get your business off the ground or thrust it to new, exciting heights. However, in the wake of an economic recession, lenders and investors are a bit more reticent to lend money. However, you have three major options when you are looking for a small business loan.
Banks may be big, complicated, intimidating institutions but they are the best place to get a small business loan. Your first concern whenever you are dealing with a monetary transaction is whether or not you are dealing with a trustworthy source. This may be questionable when you are dealing with some smaller, less-established lenders. Banks, on the other hand, are typically trustworthy and, because they are large institutions, there is usually a wealth of information at your disposal when you are searching for the right loan.
Banks also tend to offer the lowest interest rates but, because of this, they are very selective. Even profitable businesses may have trouble getting a bank loan right away. However, there are a few ways you can make your loan approval more likely:
- Start by asking for small loans. A small loan has a better chance of approval that a large one. If you can afford it, try to cover expenses little by little.
- Maintain good personal and business credit. This is, of course, easier said than done but credit is one of the first things a bank will look at when considering you for a loan.
- Don't just go to your bank; look at several institutions that may be able to help. Look at the fees, rates and advantages with each bank's small business lending programs and make a list of the ones that work for you.
- Be persistent. Make calls, follow up and visit multiple banks. Big banks can often lose you in the myriad of customers that they have. Make yourself stand out to get the service you need.
If you can't get a loan from a bank you will need to start looking for some alternatives. The Small Business Association is a government funded group that is dedicated to helping small and local businesses. At the very least, you can find helpful information on their site or you can even apply for an SBA loan.
They can direct you to banks that are SBA guaranteed; this means that they are specifically looking to lend money to small businesses. These banks look closely at your business model and your cash flow, rather than simply your credit. Although it is typically easier to get a loan through the SBA, your rates may not be as low as the ones you could get through a larger bank.
Before you settle on getting a loan through the SBA, you should explore other options. There are plenty of online resources that can connect you to alternative loans or peer-to-peer lenders. These solutions may be a better fit for you; however, just be sure to look at the industry standard interest rates for someone with your credit and financial background. They are typically not regulated like large banks or government agencies and you don't want to overpay on interest because you weren't acquainted with fair rates.