Before you can start your business idea, you will probably need to get financing. If you have already visited the bank and been turned down for a loan, then you need to take a step back and evaluate your business plan. For those that yet to visit a bank, take a moment to consider all your options. For anyone looking to get a small business loan, make sure that you have your finances in order and your business plan thoroughly worked out.
Once you have your business plan in place and have taken care of past debts, use one of these 3 options to get a small business loan.
1 – Small Business Administration Loan
An SBA (Small Business Administration) Loan is the first type of loan to consider. The SBA is sponsored by the government, but is handled through banks. Essentially, the SBA has set up a group of guidelines that banks can follow when offering loans to small business owners. With this option, banks are more likely to extend credit to an individual that they may have otherwise turned down, had they tried to obtain a standard loan.
The guidelines include the type of loans available, interest rates, and other specifics of the loan. The repayment is handled like any other loan, but you have a greater chance of getting approved for the amount that you need.
2 – Alternative Lenders
Alternative lenders are private lenders or investment groups that offer loans to small business owners. Typically, these loans will have higher interest rates, but this is because the lender is often willing to take on more risk than a bank would. This makes alternative lenders a good option for business owners with poor credit.
When considering alternative lenders, look at their interest rates, fees, and reviews. Make sure that you go through the entire contract, before signing. You may even want a lawyer to look over the loan agreement, to ensure there are no details that could result in higher payments in the future.
After looking at interest rates and fees, search online for reviews of the lender. You should be able to find reviews, whether they are positive or negative, for any major lender.
3 – Conventional Loan
If you have great credit and a solid business plan, you may also want to consider a conventional loan. A conventional loan is a standard bank loan. They will assess the risk of giving you a loan, based on your property value, net worth, credit score, income, debts, and other factors. Out of the three options, this is the most difficult type of loan to obtain.
While it may be harder to obtain a conventional loan, it will also result in the least amount of interest. In the end, a conventional loan is your best option, if you have the credit history to get approved.
Before you even decide which loan to seek, make sure that you get your finances in order. Start paying off your debts. Make sure that you make payments on time. Go over all your finances and ensure there is nothing that you are missing, that could affect whether you get approved for a loan.
These are not your only 3 options, but they are three most common choices for people seeking a small business loan. Carefully consider each option, before making your final decision.