One of the most difficult things for budding small businesses is securing financing, especially when they don’t have much of a history to draw from, or don’t have the best personal credit themselves. Even if you have the best drafted business plan and know you’ll be able to make it work, traditional banking institutions are just not excited at the idea of financing unproven small businesses.
But there are plenty of other options for struggling businesses who need that extra cash injection to either keep the lights on or take it to the next level. Here are some alternative financing options for small businesses.
Venture Capital and Angel Investors
If you think you have an interesting concept, have some intellectual property, or have some early sales to show for, then going with venture capital or angel investing could be an option. The goal here is to be prepared, know your numbers, and have a solid plan for the future. These people are looking for sure shot opportunities, but they often base a lot of decisions on their opinions of the entrepreneur.
From what they see from your expertise on the product and service, as well as your personality as a business leader, they might decide to work with you, ask for more equity in your business or for control, or might withdraw altogether. It’s up to you to present yourself and your business in the best and most sincere light.
Work with a Peer to Peer Lending Platform
Another thing you could do is search online for a reputable peer to peer lending network that will connect you with multiple lenders that offer loans for small businesses. This can be beneficial in many ways.
First, you won’t have to apply for small business loans with too many institutions, which would trigger additional credit report inquiries. Having too many credit report inquiries in a short period will have a negative effect on your business’s credit score. Second, they’ll be able to connect you with lenders who are familiar with business loans in your industry. They’ll be more likely to understand what you’re trying to do and help you.
These platforms will allow you to apply for business loans directly from their site and make the process very easy. All you’ll have to do is apply for small loans for business through their portal, and they’ll match you with lenders that could be the most favorable for you. The process is much faster than getting a loan through a traditional institution as you’ll get your response and funds in a few days contrarily to weeks or even months with a bank.
Get an SBA Loan
Small Business Administration loans could also be helpful. But these are not loans per se, but a guarantee by the administration that parts of the loan will be covered in case you default. This not only increases the chance of getting accepted, but will get you lower interest rates in most cases.
All of these options should be considered if you’re currently struggling to get financing. Make sure that you weigh the benefits of each option and choose the one that would help you accomplish your goals the best.