Business Loan

Every business owner needs proper funding to make their business successful. But the problem is those small business owners and first-time entrepreneurs do not always get proper funding to start a business. However, there are some options for them to find a proper business loan that fits their business plan, but finding it can be difficult if you do not know what these options are. The main thing you need to know is that you should find a business loan that conforms to your business plan.

The important thing is that you should not neglect any of the lending options available to you because there are so many funding options and each has its own benefits and drawbacks.

There are mainly four different options you can consider for a business loan. Let’s take a look at each one of them.

Commercial Bank

The most obvious choice for seeking a business loan is a bank. However, the recession of 2008 has made it very difficult for small businesses to get a business loan from commercial banks in the United States. Even if they are willing to give you a business loan, you should have an excellent credit score, stable financial history, and proper collateral to qualify for the loan.

Most commercial banks in the United States only focuses on the loan on big businesses as they consider small businesses a risk. Therefore, it is extremely difficult for a small business to qualify for a loan. The reason why most business owners are going to a commercial bank for a business loan is that the bank offers a low-interest rate than other funding options.

Also, a business loan from a bank will establish your credit and it will be much easier for you when you apply for a business loan next time. The main drawback is that banks take around one or two months for the approval process. If you do not have a good credit score or valuable collateral, you may have to look for other lending options. Also, you need to submit your entire business plan, marketing plan, tax records, bank records, etc. for approval.

Is Small Business Administration A Viable Option?

The Small Business Administration, or the SBA, also offers business loans for first-time entrepreneurs and small business owners. The SBA is an agency of the government that is created to finance small businesses. Even though it is very helpful for small business owners, it may be a bit difficult for first-time entrepreneurs as they have to meet a lot of requirements, and the approval process \usually takes longer than a bank.

The SBA will offer loans that can cover the start-up costs of a business, which allow you to expand the business or will ensure a smooth cash flow that will help your business to run smoothly. It is important to note that the funding is not issued by the SBA. The agency connects the lender to the borrower.

Just like in the case of a commercial bank, you also have to show a good credit score and valuable collateral to qualify for a business loan. You may also get a business loan from SBA if you were very close to qualify a loan from a bank. It will be easier to qualify for an SBA loan because the loan is provided by private lenders and are guaranteed by the agency.

When compared to other funding options, the interest rate of the SBA loan is usually low but the approval process may take time because you have to satisfy both the lender and SBA. Most often, business owners have to wait at least 3 months for approval. During the approval process, your business plan, basic work skills, experience, etc. will be scrutinized.

Credit Unions Are Worth A Try

Even though credit unions work like a bank, they are a non-profit organization that exists to serve the needs of their members. Much like a bank, credit unions also provide a business loan to business owners. However, it is very easier to qualify for a credit union loan when compared to a bank loan.

The credit unit also requires you to submit the credit score, business plan, and collateral for approving your loan. However, the scrutiny will be much fairer than a bank. The important aspect is that you need to become a member of the credit union to get qualified for the loan. Just like a bank loan, you also have to wait for one or two months for a loan from a credit union.

What About Alternative Lenders?

Business Loan From Commercial Bank

The high scrutiny of banks, the SBA, and credit unions make it very difficult for small business owners to get proper funding to start or revive their business. That is why most of them turn towards alternative lenders for funding. They are equally beneficial for startup businesses or an established business. Even franchise owners are looking for alternative funding options when are unable to find a loan.

One of the main advantages of alternative lending option is that the qualification process is much easier than other lending option and also offer a flexible repayment schedule. Since most of the funding options do not offer a loan if you have bad credit even though you have a good business plan, alternative lenders are your best option.

It is true that you get the loan quickly, but the problem is that you have to expect a little high interest. You do not have to submit your business plan or any financial documentation. The application process is usually completed online, which makes it easier.

Conclusion

It is often difficult to find the right funding solution for your small business. Contact Building Block Capital today to learn more about business lending options.