Tag: credit union

4 Major Types of Business Loan Lenders

4 Major Types of Business Loan Lenders

What happens when you have a business idea that you think will penetrate the market and be the next big thing? You come up with a well-written business plan, get to know how much capital you need against your savings. Most times savings are insufficient to cater for the new business, which is why business loan lenders are available to cover such instances.

The rise in business ideas has seen many loan-lending institutions come up to cover the gap. However, each institution has their rules towards those who qualify for a loan. Here are some options:

Banks

Banks are a great starting point for those seeking to get financed. In most cases, those with already existing businesses with cash flow are more likely to get financing than start-ups. One of the things banks consider is, ensuring that there is a traceable account activity. Usually, banks will go through your bank statement and analyze the chances of you paying back the loan. Banks want an assurance that you can comfortably pay back the loan. For people who already have a running business, the balance sheet comes in handy during the application process. The reason for this is that banks will weigh what you owe people against the assets to see if the borrower is credit worthy.

Credit Unions

For Credit Unions, their loan standards are a bit less harsh compared to banks. Most credit unions are not-for-profit entities, and their sole purpose is offering financial services affordably for the community. Therefore, their interest rates on loans are lower than banks and anybody is eligible for membership.

Home Equity Line of Credit (HELOC)

HELOCs are another great way of getting business loans. For homeowners who have equity in the house, this is a great way of acquiring a loan to finance the business. On application of the loan, the house will act as collateral in case there is any default. They, however, are high risk because in any case, you default in payment; your house is at risk and could be taken. Only go for it when sure to repay the loan without so many challenges.

Leasing Companies

A great way of getting funds from business loan lenders is a leasing company. Scrutinize what equipment is not necessary at the moment and lease it to the enterprise. The advantage here is, through an agreement, you will lease the equipment to the company, and upon repaying the loan, they return the equipment back.

Finding Fast Funding for Your Small Business

Finding Fast Funding for Your Small Business

Getting Started

With adequate support and capital, an inspiring idea can evolve into a profitable business. Let’s look at five ways to get fast small business loans for your business: banks, the U.S. Small Business Administration, online alternative lenders, credit unions, and small business grants.

Banks

Talking to someone at a bank can help you to determine your eligibility for funding. You can also find out what documents are needed to apply for loans, and what the best options are for your situation. Locally owned banks have an interest in the economic development of the community. Therefore, they are a great place to start looking for funding a business. In fact, 43% of small business loans in the third quarter of 2016 came from community banks (Federal Deposit Insurance Corp., 2016). Although talking to a bank representative can be beneficial regardless of what stage of your business plan you are currently in, bank loans are given to businesses that already have strong credit and collateral. Therefore, other alternatives are a better option for fast small business loans for startups.

U.S. Small Business Administration

The SBA offers lenders a federal guarantee on small business loans. The lenders are often local community banks. The SBA makes it less risky for traditional banks to loan you the funds for your business, and it can help you find ideal rates. The application process for a business loan through the Small Business Administration can be taxing, but there are organizations that can help you through preparing and submitting all the necessary documentation.

Online Alternative Lenders

To avoid the strict lending policies of traditional banks, an increasing number of entrepreneurs are borrowing from online alternative lenders, where access to capital is less limited. Borrowers with bad credit who need fast cash can benefit from these funding sources. Although online alternative lenders often say “yes” when banks say “no,” the interest rates are higher. Still, they remain a reliable source for fast small business loans, especially for entrepreneurs with limited resources.

Credit Unions

Credit Unions can offer reasonable interests rates with loans backed by the SBA. As a member of a credit union, you can reap the benefits of personal relationships and name recognition. This is mainly because credit unions are often tied to the community through their cooperative style of operation. Furthermore, credit unions have increased their lending to small businesses over the years, unlike traditional banks.

Small Business Grants

The obvious benefit to funding your business using a grant is that the money does not have to be paid back. This is a more favorable option than the limited accessibility of funds offered by banks as well as the high interest rates offered by online alternative lenders. Non-profit organizations, government agencies, and corporations are the typical suppliers of small business grants. Some of these grants are aimed toward specific kinds of business owners such as women, minorities, or veterans. Although it can take much time and energy applying for grants, finding free money could be well worth it in the long run.
There are several approaches to funding a new startup or finding fast cash for a current business. Low credit usually means limited options for entrepreneurs. In addition to traditional banks there are credit unions who offer loans through the SBA. Online alternative lenders lend money regardless of credit ratings, but at higher interest rates. Still, perhaps it is always worthwhile to find and apply for grants because they do not require repayment. Business owners should explore their options and choose what best fits their needs.