Entrepreneurship is a dream many people have but few are able to achieve. Some spend their life's savings to fulfill their dreams of owning their own business.
Once the start-up capital is gone many small businesses struggle to keep their doors open.
In cases where small businesses are dependent upon payment after service is provided, added stress comes into play. If a client doesn't pay on-time the business may not be able to meet payroll or fund their next project.
The problem is magnified when struggling small businesses are providing a product or service to other small businesses. If they are both in the same cash-strapped dilemma, it can be financially catastrophic.
Taking out commercial business loans may not be an option for some small businesses that have no equity and can't demonstrate their creditworthiness.
Continue reading to learn about trends that may help small businesses find leverage in their quest to keep their doors open.
Why Do Small Businesses Need a Generous Cushion for Operating Experience?
Every business owner is waiting for that big contract to take their company to the next level. What happens if that dream job comes when there is no cash on hand?
For those in the construction industry, this is a constant fear. Waiting on payments that could take up to 90 days to hit your bank account is stressful by itself.
Having to pass on a big contract that could fund your business for a year can be devastating.
How Do They Operate Without Access to Loans
General contractors often fund projects with money earned from previous projects. They may secure a 10% deposit to start a new contract but the next draw is dependent on a percentage of work being completed.
In the meantime, they still have payroll to meet, suppliers to pay, rent, utilities and other obligations that do not stop.
What they need is money in the bank that allows them to take on the big project and keep operating and growing. Realizing a business's full potential is what commercial business loans do for small business owners.
Not having access to traditional banks drives them to seek alternative ways to fund their businesses.
Crowdfunding to Raise Capital
Crowdfunding when used right can be an invaluable resource for entrepreneurs.
Over the past few years, crowdfunding sites have popped up around the world. The concept is simple. Create a campaign, get people to give and walk away with up to 90% of the donations.
It's a risky project to embark on, but it doesn't cost you anything but your time. Creating the campaign is the easy part. The hard work comes when you have to market your vision to friends, family, and total strangers.
There are no credit checks, no upfront cash needed and you can make withdrawals as money is donated and without complex paperwork or delays.
Growth in Online Lender Market
Technology continues to push consumers out of brick and mortar businesses and onto the internet for services. The E-commerce market is leading the way.
Online lenders are in a position to get working capital into the hands of business owners in as little as one day. They can bypass strict regulations that can hinder traditional banks and lenders.
Entrepreneurs with bad credit find online lenders to be their saving grace for getting commercial business loans.
If a borrower is in need of immediate capital to close on a big deal, finding an online lender to fund the project is a quick solution. There are fewer underwriting requirements and more flexibility.
Banks will Partner with Alternative Lenders
One trend the financial industry is seeing is creative partnerships between big banks and alternative lenders.
Roadblocks remain when small businesses apply for commercial business loans at their banks. This doesn't mean banks don't want to get in on the action.
According to the Small Business Administration (SBA) $29.8 billion in business loans was approved in 2016. Banks are taking notice and figuring out ways to bypass stiff lending regulations to reach more businesses seeking loans.
As Digital Commercial Business Loans Grow so does Call for Increased Regulations
Just as the big banks are watching online lenders, federal regulators are watching the banking industry change.
Financial technology or Fintechs, have grown swiftly over the past few years. With that growth has come calls for increased regulations.
With technology in the driver's seat, the changing climate can potentially reframe the regulatory landscape.
As it stands now, Fintechs do not operate the same as traditional banks. They do not offer checking or saving accounts. By partnering with banks those lines become blurred.
One positive for Fintechs is regulators acknowledgment that they are providing a valuable service to an underserved population.
If a business owner can demonstrate an ability to repay funds, they should have access to commercial business loans. On the flip side, if a lender is willing to take the risk they should have that opportunity to underwrite those loans.
Could You Benefit From a Working Capital Loan?
Alternative lenders have made short-term loans more accessible. Some have made the difference between businesses being able to keep their doors open.
Some tweaking may be needed to add protections for both the lender and borrower. But overall it is a great solution for those in need of working capital.
If you're in need of financial assistance and have been turned down by traditional banks, help is here.
We Can Help
Express Capital Funding offers both working capital loans and equipment financing. We are here to help small businesses grow their operations.
Whether you need funds to cover seasonal slowdowns, payroll, advertising or expansion, we have a plan that will work for you.
Visit our website today to see what we can do to help your business grow.