There are a variety of different sources available that can accommodate your funding needs. I will discuss your particular needs with you in a consultation session and help you take a self evaluation and assessment of your funding needs. Then I'll point you to the tools you need to prepare for your application. Lastly I'll review everything with you. These are the primary things that will affect your success in getting a business loan:
1. Financial/Tax Returns (existing businesses) - is the business making a steady profit?
2. Business Plan - you need this to show how the funds will be spent and what your return on investment (ROI) is expected to be. As a service to my customers I will prepare a business plan for you free of charge. Refer to the section on Business Plans for details and ordering info. You may also wish to take a look at my blog post on Business Plans.
3. Owners Personnel Credit Score – most, but not all business loans for small business will require the indemnification of the owner(s).
Loans for Startup Businesses
Finding lenders to fund startup operations can be a challenge, but I have solutions that are possible for many startup ventures. I can source your loan request throughout a network of brokers and over 50 commercial lenders that look deeper in your business model and personal qualifications then most conventional lenders. Most will require reasonable good credit and if you have assets especially real estate to pledge it can be helpful but not necessary. Startup loans are normally going to be in the $10K-$100K range and rates can go as low as 7.5% on unsecured lines of credit. These type loans will require two years of personal tax returns, cost estimates of any equipment to be purchased, and a financial plan. I can help guide you through this process to enhance the possibility of getting the funds you need. The companies I partner with are well established and target small businesses including startups.
Loans for Existing Businesses
Conventional Lenders will normally require that the business has been in existence at least one year and has tax returns and/or financials available for their review. Because business loans are higher risk you can expect to pay a bit higher interest rates than you would on a personal loan. However good financials and credit scores can significantly qualify you for lower rates. Funds are typically used for business expansion projects such as new location acquisition, establishing an internet presence, warehouse expansion, in-store remodeling etc. Most lenders will charge a loan origination fee but it can usually be rolled into the loan. These loans typically range up to $500,000 however if there is significant real estate pledged can go well over $1 Million. I also have good sources for shorter term loans, and lines of credit.
SBA Guaranteed Loans
What is an SBA Loan? The U.S. Small Business Administration does not loan money directly to businesses, what they do is guarantee a percentage of the loan to a participant lender, usually around 85%. There are different categories of SBA Loans to fit different types of business situations.
SBA 7(a) Program and Express Loan Program - The 7(a) Program is the primary program designed for all existing business for working capital or business expansion. The basic requirements are you must have been in business for two years, have a credit score around 650 and be able to show repayment ability through your financials. Loan amounts can go up to $350,000. Payback times are usually around 10 years and the interest rates averages about 7.5%. The SBA Recently established their Express Loan program that allows for a more simplified application procedure and a quicker turn around on SBA approvals - sometimes just a few days. However you pay a slightly higher interest rate. The best source I have found for this type of loan is SmartBiz The company can Pre-qualify you in as little as 5 minutes without impacting your credit score, then you work with their relationship manager who can put your package together for you. They then submit to an SBA approved lender that best fits your business and will be most likely to fund your loan. Funding can take place in as little as 7 days. SmartBiz is rated A+ by the Better Business Bureau and has a 5 star review ranking. Contact SmartBiz for more information or to apply
SBA Microloan Program - If you are a startup business, while you can’t qualify for the 7(a) Program you can probably qualify for the SBA Microloan Program. This program provides funding up to $50,000. You will need to provide a small down payment on your project, usually about 10-20% and provide a personal guarantee. There is a 1% loan origination fee. Approval times are very quick. This type of loan is normally done locally so there are no on-line sources I can recommend. Visit the SBA website and request their assistance in finding a local lender in your area that participates in the Microloan Program
The SBA 504 Loan program - is a powerful economic development loan program that offers small businesses another avenue for business financing, while promoting business growth, and job creation. The 504 Loan Program provides approved small businesses with long-term, fixed-rate financing used to acquire fixed assets for expansion or modernization. 504 loans are made available through Certified Development Companies (CDCs), SBA's community based partners for providing 504 Loans. For more information or to start the process visit the SBA Website
If you have a business that involves credit extension to your customers, invoice factoring can be good way to alleviate any cash-flow issues. The factoring company will cash out your accounts receivables up front, and your customer then pays the factoring company. The factor rates average around 3-4% but they can be higher or lower depending on the type of business and the type of customer. Also some factor companies will actually purchase the receivable from you in which case you are no longer responsible for the collection. In those cases expect the rates to be higher due to the added risk. Credit and financials are mostly not issues with factoring. If you think this might be a good option for you, schedule a counseling session with me
If you are not able to qualify for conventional lending to start up or expand your business there are other methods available:
Home Equity Funding: The easiest and perhaps the most obvious is if you own your own home, get a home equity loan. Most home equity loans are unrestricted so far as what you use it for. Home equity can usually be funded at up to 90% of the equity you have in your home.
Lending- Based Crowd Funding: Also called Peer-to-Peer lending. This is becoming a very popular method of raising funds for startups. Your funding comes from a pool of individual investors. The company we partner with has a unique process of reviewing applications using machine analysis of many data points. Your credit score needs to be at least 620 or better (lower than most conventional lenders) but the model considers you education, experience, employment history and other factors to develop a statistical prediction model. The company can fund startup businesses for as little as $1,000 and up to $50,000. Terms are 3-5 years, and interest rates vary from 9-30%. The process is fairly simple and quick. The most popular site for this is Lending Club
Equity-Based Crowd Funding: You literally sell part of your company as equity to private investors. The good news is this isn’t like debt, there is no payback, the bad news is you now have multiple owners/shareholders. This option should only be considered if you are need significant funding for an innovative new business idea. If you every watched the TV show Shark-Tank, that is the type of businesses that are targets for this type of funding. There are several great equity funding sites including Kickstarter, Seedinvest, Crowdfunder and Microventure.