Most small business owners struggle with funding their business. While it is true that there are somewhat limited options to fund small business still you have quite a few opportunities to do so. Rather than believing that there is no way to fund a small business, it is time to look at different methods to fund your small business.
SBA loan:
SBA stands for Small Business Administration. Usually speaking, SBA loans are the most accessible for small business owners. You need to understand that to be eligible for an SBA loan; you need to meet proper criteria.
Some of the requirements include:
• You should have good credit to qualify for the loan.
• Your business should be in an industry that makes it eligible for SBA loans.
• You should have invested equity in your business to qualify for an SBA loan.
The very thing you need to do is to look at the criteria, and after that, you can determine whether you are eligible for such a loan or not.
Small Business Lending Fund:
US government also has a dedicated fund for small businesses. This fund aims to help the economy grow. While it does not manage this fund itself, it operates the fund through various lenders in every US state.
Banks, as well as lenders, are encouraged to lend to small businesses through this fund. The more lending a particular bank undertakes, the lesser its proportion in the loan amount, and the greater the loan amount given by the government. This way, the bank’s risk reduces, and the business owner gets loans at more favorable terms and better rates.
You can easily find the lenders and banks participating in this program online.
Small Business Innovation Research Program:
Another program a small business owner can take advantage of is the small business innovation research program. If you’re innovating in your field or are developing something new, you can certainly tap into this research program to get funds for your small business.
US small business administration is the department that handles this research program. It offers you various types of grants if your business qualifies. You can choose between a future grant, closed grant, open grant, and so on. Since it is a grant, the qualification process is pretty lengthy. Also, you need to fully qualify for the grant to get the funds. It is another way to fund a small business if it is innovative.
National Association for self-employed:
This is a pretty small grant, however, you can easily tap into this grant to sustain your business. National Association for the self-employed has granted approximately $ 1 million since 2006. The amount of the grant for a single self-employed person is $ 4000. The advantage is that you can qualify for it easily. You can spend this money for:
• Expanding your current facility
• Hiring more employees
• Marketing
• Advertising
However, you need to understand that you can only get access to this grant if you’re a member of this association. Membership costs are $ 120 annually, and therefore it is not that difficult to become a member of this organization.
Crowdfunding:
Crowdfunding is fast becoming an alternative mechanism to fund your small business. The good news is that it can fund businesses across various industries. The selection criteria is not that difficult either. If you aren’t familiar with crowdfunding, it involves numerous people funding your business in small amounts each. These are donations, and you can gift them a small item in return for their help. Since you do not need to repay the donors, your business will not have that debt on the balance sheet. On the flip side, you might have to spend a lot of time preparing a sales pitch and demonstrating your business on crowdfunding platforms.
Some of the crowdfunding websites you can utilize include:
• Kickstarter
• RocketHub
• DreamFunded
• Gofundme
If you’re looking for a completely risk-free way to fund your small business, do check out crowdfunding websites.
Credit unions:
Credit unions are comparatively more liberal than banks. That is why you can easily get a loan for your small business from a credit union. They also do not have stringent qualification criteria.
Moreover, credit unions might charge a lower interest rate.
The only bit of problem is that not every credit union can fund every type of business. Some credit unions might cater to some specific industries. Other credit unions require you to be a part of the union itself to get the funding. The first task is to look at the credit unions catering to your industry and, after that, look at the qualification criteria. Once you figure out the same, you have to go through the lengthy process, and some might even ask for collateral. Credit unions are indeed an excellent option to fund small businesses if you’re willing to put up that collateral.
Banks:
Wondering why we have kept banks last?
Banks are more interested in funding large businesses. Moreover, they have very stringent credit score requirements. On top of that, the interest rates might be on the higher side.
The advantage of banks is that they can provide access to a vast pool of capital once you jump through the hoops. It is a good idea to look at banks only when you have exhausted all the above options to fund a small business.
Online Lenders:
Online lending has grown by leaps and bounds in the last few years. That is why you can easily fund your small business through online lending. There are numerous private companies like Paypal and square which can lend you money. Apart from that, various other SBA-backed lenders can lend you money online. However, if you do not want to go to the traditional institutions, numerous online lenders have emerged to assist small businesses secure the funding needed to run their day to day activities.
We will go into the details of these online lenders below.
• Kabbage:
Kabbage is an online lender which provides you with flexible repayment options. Rather than focusing on your credit score, it focuses on the cash flow of your business. The entire process is pretty fast. Every business with solid cash flow can get a loan. Moreover, since there are no application fees and the qualification criteria is transparent, it is one of the best online lenders you can go with.
• Fundbox:
Fundbox has been around since 2013. This lender offers you a revolving line of credit. You can easily check your qualification online. There will be no hard inquiry. Since the decision is made in minutes, you can easily get the line of credit. It offers you a line of credit up to $ 100,000, which ensures that you can easily fulfill your short-term capital requirements.
• Kiva:
Kiva is a good choice if you’re looking for microloans. It offers loans at 0% APR. You can pay back these loans in three years. The company has been around since 2005, and since then, it has given such loans to thousands of businesses. It is a platform that connects lenders with borrowers. The downside, however, is that loans are limited to $ 15,000. Also, sometimes it can take up to 30 days to get the funds. If you’re looking for a small loan without interest, you can certainly go with this lender.
• Fundera:
Fundera offers you multiple funding solutions for your business. Firstly, it provides loans through SBA. If not, it offers business loans and a line of credit. Since you get all options on a single platform, it is easy to apply for multiple funding avenues if you do not qualify for a single one.
Not only that, it allows you to compare the business loan offerings from various financial institutions. That way, you can better understand whom you should go with. You need to submit an inquiry for qualification, and the company will check your credit score. However, there is no hard inquiry on your credit report, which means that your credit score will not reduce even if you get rejected.
Fundera has been around since 2013, and it is pretty credible. However, one downside is that it is a small marketplace, which means that the lenders are limited. It synchronizes different funding options for small businesses on a single platform, which makes it a good choice.
• OnDeck:
OnDeck has been around since 2006. It offers you loans up to $ 250,000. If you need a line of credit, it provides you up to $ 100,000. The best thing is that if you’re eligible for the loan or the line of credit, you can get the funding the same day. Eligibility criteria and other details of the loan are clearly listed on the website. You will know right away whether you will qualify for the loan or not. However, this platform requires you to have a credit score of at least 600.
It is easy to get funding for your small business through these online lenders.
It was tough to fund your small business a few years back. However, that is not the case any longer. With the help of our guide above, now you have multiple avenues to fund small businesses and fuel its growth rather than worry about the day-to-day expenses.