2017 has been a good year in terms of business and finances. Despite some political and domestic turmoil, the economy continues to perform well. The American economy has been growing at the fastest rate in 2 years. This economic optimism is inspiring many to look for business loans now.
There are more small business owners each year. As of 2016, small businesses account for 99.7% of all business in the United States. These numbers are going to continue to climb. According to the most recent Biz2Credit Small Business Lending Index, small business loan approvals from big banks increased to 25% in October 2017.
Big banks are just one source of income for those looking for a loan. 46% of business owners feel that it's easy to procure a small business loan. 36% of small business owners are operating out of pocket, however. This suggests that many business owners looking for a business loan now aren't aware of the lending options out there.
Here are three of the best sources for getting a business loan now.
3 Places to Get a Business Loan Now
Here are the three best places to look for funding for your small business.
If you qualify for a business loan now through a traditional bank loan, it might be your best bet. Large banks have more money on hand thus they tend to give out business loans more freely. They have every incentive to do so as it encourages business owners to keep accounts with their branch. This perpetuates the cycle.
Banks and credit unions are some of the best bets for those who don't want to dig for other loan options. Securing a bank loan can be difficult, however, as their requirements tend to be quite high. This can be an issue for a small business just starting out. If you're looking for a business loan now, you might be better off exploring some of the other lending alternatives.
Small Business Association (SBA) Loans
The SBA has any number of fantastic small business loans available for startups and entrepreneurs. SBA loans tend to be available in all shapes and sizes. They also tend to be available for companies without an extensive credit history.
How to Apply for a SBA Loan
Follow these steps to find out if you qualify for an SBA Loan.
To qualify for an SBA loan you'll generally have to qualify for the general borrower guidelines as well as meeting the SBA eligibility requirements.
SBA Loan Eligibility Requirements:
- Must have a FICO score of 680+.
- Have 10% or more of the loan amount in assets.
- Have some collateral. SBA loans don't have to be 100% collateralized, but the more collateral you have the easier it will be to get a business loan now.
- Must have been in business for 2+ years. Startups may be eligible for an SBA 7a loan, but it's difficult. Startups looking for SBA funding should have experience in business management and within the industry they're working in.
- Business must be profitable.
- Must not have any delinquent payments or accounts.
To be eligible for the SBA 7a loan program there are certain requirements which must be met.
Requirements for SBA 7a Loan Program:
- Have less than 500 employees and do less than $7.5 million in annual sales.
- Be working in an eligible industry. This includes most non-speculative ventures and the majority of non-vice industries.
- Be a for-profit business operating in the United States.
- Must use alternative funding before seeking financial assistance. This includes personal assets.
- Be able to demonstrate a need for the loan amount requested.
- Must create or retain jobs that are in line with the SBA's goals.
The SBA loan process can be rather time-intensive. If you're looking for a business loan now for working capital or the like, you might want to check out some of the alternative lending options.
Alternative Lending Options
Alternative lenders like advance loans or a direct lender are some of the fastest ways for a business owner to get their hands-on resources in a hurry. The application process is very simple.
That leads to the question, "What is alternative lending?" Simply put, it's any form of lending outside of a traditional bank loan.
Some Examples of Alternative Lending Include:
- Online loans
- Direct lending
- Peer-to-peer lending
- Cash loans
- Angel investors
- Community Development Financial Institutions (CDFI)
- Credit Unions
Alternative lending came to fruition through a perfect storm of digital technology and economic need. The first alternative lending market came on the scene in 2007. Then the bottom dropped out of the global economy in the wake of The Great Recession of 2008.
The financial free fall following The Great Recession forced many to consider alternative means of securing finances. Luckily, what started out of necessity has turned out to be advantageous for small- and medium-sized business owners.
The number of loans given to small- and medium-sized businesses has been dropping like a stone after The Great Recession. Bank loans for small-businesses decreased by 38% between 2006 and 2014. Bank loans to larger companies increased by 37% during the same span of time.
Banks need to secure their investments. They're going to go with the sure bet over a risky loan every time. This means small-business owners lose out. Only 20% of small-business owners receive the loans they apply for.
Alternative lending options are a way to overcome these limitations and realize your goals and dreams.
It's getting increasingly easy to apply for small business loans with each passing year. With entrepreneurship on the rise thanks to a steady economy, make this the year you finally begin your small business or start taking it to the next level.
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