Needing financing as a small business owner isn’t uncommon. Many businesses, small and large, need a financial boost at least once. The thing is, however, that obtaining a small business loan through a conventional bank isn’t always the easiest process. Banks often have strict requirements. If you have less than ideal credit or a younger business, you might not qualify for a conventional small business loan.
Fortunately, you have other options, such as loans through local banks, credit unions, and online lenders. You also have alternatives to conventional loans with business lines of credit, invoice factoring, equipment financing, merchant cash advances, and more. If you’re looking at alternative financing options, here are a few benefits to keep in mind.
Options for Those with Low Credit Scores
Conventional banks often require good to excellent credit before they’ll lend money to anyone, including small businesses. There are steps you can take to improve your credit score, but if you need money now, you might not have the time to clean up your score. Several alternative financing options provide solutions for small business owners with subpar credit. Some options, like merchant cash advances and invoice factoring, pay more attention to other factors, placing less importance on your credit.
Unsecured Funding Options
Small business loans through larger banks require collateral. Not all business owners have the collateral necessary to secure financing. Many alternatives to traditional financing are unsecured, meaning that you don’t have to put anything on the line. You might pay a bit more in interest, but you won’t risk losing business or personal assets if you default on payments.
Easier Applications and Faster Approvals
Conventional banks can take weeks (sometimes even months) to process loan applications. If you need money quickly, waiting might not be an option. The applications may also request a substantial amount of information.
Many alternative forms of financing have much simpler processes. The applications are typically shorter (and you can often fill them out online), there are fewer documentation requirements, and the processing times are much shorter. Depending upon the type of financing, you may get the funds you need in just a couple of weeks. Some options provide financing in just a few days (and some loans get funded in as little as 24 hours!).
Just because you don’t qualify for conventional business loans or financing through a larger bank, that doesn’t mean you’re out of luck. Alternative financing options make it easier for small businesses in all situations to get the funds they need to grow and succeed.