Capital is important to start and grow a business and sometimes it can be hard to find. While there are many different financial options to fund your small business, finding the right one to fit your business needs can be tough, if you don't know what to look for. During the SCORE webinar, "Get Your Business Funded" small business columnist Steve Strauss gives an overview of four lending options for small businesses.
Below are four types of lending to consider for your small business.
“Banks want to lend to you, they don’t want to say 'no' to you. It is our job to make it easier for the bank to say 'yes' to us,” says Steve. When considering taking the traditional lending route, one of the best things you can do is start a relationship with a bank early. "Bankers are people, they invest in people," says Steve. Be sure to create a relationship with your bank and let them know your passion for starting a business. They will be more willing to take time out and let you know what guidelines you must meet to ensure a smooth process for securing a loan.
- Start a relationship with a bank early
- Usually has strict guidelines
- Often takes into account both personal and business credit profiles
- Requires business and financial documents
- Generally offer the best terms
- Tough for startups
Alternative lending or micro-finance loans are “easier to get and asset requirements are more generally relaxed,” says Steve. Payback times vary with micro-finance, it is very important to research and find the best loan available to you.
Micro-finance loans may be extremely expensive to pay back or have unusual requirements
- Wide variety of options and terms
- Community Development Financial Institutions
- Community Banks
- Community Credit Unions
"Equity funding or angel investors are great for all sorts of reasons. They are typically people in an industry who made money in that industry and want to invest back. They will have money, connections and expertise," says Steve.
Angel investors will require you to give up some ownership in the company in exchange for operation capital.
- Can be a wonderful way to bring on investors and experts who have vested stake in your success
- You will have a partner
- Popular funding options where you ask a "crowd" to fund an idea
- 2 Types: "Gift" and "Equity"
- Generally used to pre-sell products or opportunties
No matter what route you take to secure lending for your small business, it is important to know the available options and find one that best fits your business needs. To learn more about securing a loan and tips on applying for a loan, listen to the full webinar: Get Your Business Funded.