When you’re looking to start a business, you’ll likely need some working capital to get that business off the ground. You can find this from a variety of sources, but one of the most common is via a business loan. Business loans come in all shapes and sizes and vary by lender. Here are some ways you can find business loans in an over-saturated lending market.
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Look For Business-Focused Lenders
There are business specific lenders out there that lend money exclusively to small businesses and entrepreneurs, or that have higher approval ratings for small businesses. It’s incredibly difficult to get a small business loan through a traditional bank, simply because these smaller loans aren’t as profitable as say, mortgage loans.
They’re also riskier. If you think about it, a business is more likely to go under than a person is to default on their mortgage loan, especially considering that most US businesses don’t make it past their first five years.
When you look for a small business loan, try looking for lenders who focus on small businesses. For instance, Wells Fargo has positioned itself as the nation’s top lender to small businesses. This bank has lent more to small businesses in the past decade than any other bank. This a great place to start for your business loan.
The Small Business Administration
The Small Business Administration is a government agency that will back specific loans for small business owners. They’re usually administered through an approved bank, with loan terms ranging from 5-25 years and interest rates as low as 7%.
These loans typically have longer approval times than traditional banks loans, however, and require a lot of paperwork. If you’re unable to acquire one of these loans, the SBA has access to other resources to help you get the funding you need to get your business off the ground.
Online Lenders
The world of online lending has evolved quite a bit since its inception. There are many legitimate online lenders that can offer decent interest rates, better loan terms, and even faster turnaround times for when you need cash ASAP.
Online lenders don’t have to worry about the overhead costs of running a bank, and therefore you’re likely to get a better cost for your loan. Their online database means a faster turnaround time and plenty of security for your information.
Among the top online lenders is a company called Upstart, which is the first company of its kind to include AI and machine learning in its approval process. The AI considers many factors other than just your credit score, creating a more fair system that works.
Upstart boasts a 75% lower default rate than traditional banks and a 173% higher approval rating. The lender has made waves in the industry in recent years with its emerging technology, and by the end of last year, 60% of its loan process was automated. Check out these reviews of Upstart for the latest information on the company.
If you don’t feel comfortable with an artificial intelligence system handling your lending, there are hundreds of other options on the web. Just be sure you know who you’re borrowing from and do all the necessary research into the company before you borrow.
Friends and Family
Friends and family can be a viable option for securing a loan for your new business. You can even include whoever agrees to loan you the money in the business itself so they can get a better idea of where the money is going.
While asking friends and family for a loan certainly isn’t for everyone, it’s not an option that should be ignored, either. A bank is an entity and one that is for profit, meaning they’re trying to make as much money as possible off of the loan.
A family member or friend may be able to offer more flexible repayment terms or little to no interest. If you’re having trouble securing a bank loan or simply don’t want to get stuck in a 5 or more year repayment plan, asking friends and family might be a good idea.
Participate In Business Competitions
There are dozens of startup competitions that pit your idea against other small business owners for a cash loan or grant at the end of the competition. This is a great way to show off your idea and secure funding for your business at the same time.
Most startup competitions have very specific rules and the competition is fierce, as many business owners from all over are ready to enter, and some may even have a similar business idea to your own.
You can’t win if you don’t enter, however, so don’t let the fierce competition hold you back. If you don’t win the money, you’ll at least have a chance to present your idea and shed some light on your up and coming brand.
Conclusion
Business funding is much easier to come by than it has been in the past. With online lenders and things like smart lending through AI, securing a business loan is no longer an intimidating process bound to for disappointment.
The trick is to know where to look. Apply with banks who are known for small business lending, and always check out any online lenders before you borrow from them. If you follow these simple rules you’ll be well on your way to funding the business you’ve always wanted.
About Carson Derrow
