Loans for small business encompass all financing options available for business owners. Although, technically your business doesn’t have to be “small” in order to get one. Each type of loan is unique in addressing different specific needs. One type of financing helps entrepreneurs get new equipment. Another helps make unexpected purchases. Others help business owners with fair to bad credit scores, etc.
How Do They Work?
Business loans act in very similar ways to personal loans. However, they can only be used for your business. If you’ve ever taken out a mortgage loan, student loan, or any other type of loan for personal use, then you already have a good idea as to how they work. A business financier lends money to a business owner, who can then use the capital to fund their specific needs. The loan is then gradually paid off over time until all lended funds are depleted. Different types of financing are paid off in different ways. Some come with fixed payment terms, in which a certain amount of capital and interest must be paid in regular predetermined intervals. Others come with payment terms that offer flexible deadlines that are affected by the nature of each loan itself, and not by predetermined payment periods. Similarly, interest rates also differ depending on the type of financing you obtain. We will explore these concepts in further detail below.
What’s Considered a Small Business Loan?
Any loan specialized exclusively for small business use is considered a small business loan.
Ironically, you don’t need to own a small business in order to obtain most of them. This excludes loan types such as SBA loans, which can only be obtained by small business owners.
If you would like to see if your business is considered “small” by the U.S. Small Business Administration (the SBA loan originator) and the North American Industry Classification System, click the link here to find out: What is a Small Business?
Other types of financing options include:
- Business Term Loans
- Fast SBA Loans
- Small Business Equipment Loans
- Accounts Receivable Financing
- Revolving Business Line of Credit
- Merchant Cash Advances
- Purchase Order Financing
- Commercial Mortgage Loans
- Franchise Financing
- Secured Loans
- Unsecured Loans
- Startup Business Loans
- Medical and Dental Practice Loans
- Minority Business Loans
- Business Loans for Women
- Veteran Business Loans
Why Use Alternative Financing?
Small business owners need a dependable source of funding in order to take on any opportunity, and solve any business challenge.
From taking on more customers, to hiring more staff, to purchasing materials, fixing broken equipment, managing payroll, to getting working capital in times of interrupted cash flow, at some point every small business needs help optimizing their operations.
Using your personal finances and business profits is one choice. However, most small business owners wind up switching to borrowing capital for several reasons, including:
- Not paying full expenses up front
- Saving cash with a lower cost of capital
- Protecting business and personal assets
- Saving valuable time and resources
- Bridging gaps in cash flow
How Do You Qualify?
All you need to qualify through National Business Capital & Services is
- 6+ Months in Business
- $100K in Annual Gross Sales
- No Minimum FICO Required
However, qualifications will vary depending on the type of lender providing them, and the type of business loan you need.
For example, in order to qualify for an SBA loan, you will need:
- 6+ years in business
- $10K in Monthly Gross Sales
- And 685+ FICO
Approval Difference Between Banks and Alternative Business Financing
Generally speaking, the better your business financials and credit score, and the longer you’ve been in business, the lower the small business interest rates will be, and the more desirable your terms will be. Since there are no federal regulations that set fixed qualification standards, it is up to the banks and other lenders themselves to create their own set of requirements for approval.
Traditional lenders including banks are known to set generally higher standards for approval. While this results in financing options with more desirable terms, it also means that the vast majority of small business owners do not match these requirements, and thus are denied funding. Choose alternative business financing for easier approval, with financing options that offer the same (if not better) terms than banking and traditional lending offers.
What Are the Interest Rates?
Interest rates vary depending on the type of financing acquired. The two most common types of rates include annual percentage rate and factor rate, although many other interest rate types are also offered via alternative financing. Factor rates are the most common type of interest rates among fixed-rate business loans. These are represented by a fixed decimal number, which sets the rate for the lifespan of the business term loan.
Annual percentage rate, or APR, is represented by a percentage. This percentage fluctuates depending on the amount drawn from financing options such as a credit line by a business owner within a given year. APR rates provide more control and planning opportunities for business owners to determine how little or how much they pay in interest. Factor rates, on the other hand, give business owners a more solid and consistent knowledge as to exactly how much they will have to pay within a given time.
There are, however, options that do not follow interest rates at all. These include merchant cash advances, in which a fluctuating portion of sales are used to pay off a lump sum of money, given to the business owner in advance. SBA loan rates, on the other hand, are largely bound generally lower government prime rates. With such a wide spread of different rates to choose from, speak to an advisor before moving forward with rates you aren’t completely comfortable with.
How Hard Is The Approval Process?
This answer changes depending on the channel you seek financing through.
90% of the clients who apply through National Business Capital & Services get approved, due to our simplified process, and easier approval qualifications.
In contrast, banks are typically the tougher type of lender to get funding through due to approval requirements that most entrepreneurs cannot meet.
They are also a much slower at processing funds, due to more banking regulations and institutional paperwork requirements.
Alternative business lending allows for expedited processing with minimized paperwork and less red tape, resulting in business owners gaining access to funds in a fraction of the time taken by traditional lenders.
Are They Secured with Collateral?
Some are, and some aren’t. “Secured”, meaning loans that require collateral, are leveraged by a form of liquid or capital assets.
The collateral required, however, takes the form of indirectly owned assets, instead of personal or business assets like real estate.
Indirectly owned assets that can take the form of collateral include newly leased or purchased equipment, customer invoices, and portions of future sales.
“Unsecured” financing, or options that have no collateral requirements, are also available through alternative financing.
This offers protection of one’s assets in case of foreclosure, as well as an expedited funding process, due to no valuation process having to take place.
How Long Are the Terms?
Generally speaking, terms can range anywhere from 6 months to 10 years.
SBA loan terms last anywhere between 10 to 25 years.
Although most small business owners shoot straight for options with longer terms due to their smaller payment installments, this is not always the best option for every business.
For many businesses, short term financing options may be the best solution to their business needs, and provde a lower overall cost of capital long-term, as well as valuable time, energy and immediate funding relief.
Be sure to consult with a Business Financing Advisor to determine the best term length option for you.
Financing Options for Women, Veterans and Minorities
The alternative financing space has options for demographics known to have a tough time getting financing to grow and improve their businesses.
These loan types include:
How Much Can You Borrow?
You can get as many loans as you’d like at a time. The decision of how much you should borrow is a different story.
Most small business financiers advise that you only take out one or two loans at a time.
Some loan types compliment each other perfectly, such as fast business loans and SBA loans, and can benefit small business owners in ways not possible by themselves.
It’s crucial that you speak to a Business Financing Advisor before applying to more than one at a time, so as not to be overwhelmed and over complicate potentially simple funding needs.
Where Should You Apply?
Many types of financing is offered by both federal and independent business financing companies.
However, the variety of options varies depending on the type of lender you choose.
Most direct lenders tend to offer very few financing options. These lenders often specialize in providing these single or few options, which makes competent direct lenders a valuable asset when seeking specific types of business funding.
This goes for banks as well. Most small business owners go to banks to apply for SBA loans alone. However, there are banks that offer other options, though not as many as those offered by alternative financing companies.
As an alternative financing company, National Business Capital & Services has exclusive connections to more than 75+ lenders in the global marketplace, made up of all types of specialized lenders, along with traditional lenders as well.
That’s what makes our services so valuable to small business owners-if you’re looking for a loan from a certain bank or lender, we can get that for you.
If you would like to explore all of your options, and find you the perfect business loan in the marketplace for you and your business, we can do that too.
How to Get Approved with Bad Credit
Getting approved with bad credit through a bank is nothing short of impossible.
On the other hand, independently set standards by National Business Capital & Services allow for the approval of all credit profiles, regardless of how low small business FICO scores may be, and how blemished their financial histories.
Click the link here for more information regarding bad credit business loans: How to Get Small Business Loans for Bad Credit
Is Small Business Funding Legit?
Yes! There are small business financing options exclusively for businesses with smaller staff sizes and revenue streams that cannot be obtained by larger-scale businesses. One of these options include SBA funding.
They’re also legitimate in a legal sense as well. Although not all financing options are held to federal regulations, others are regulated at the state level, so you can rest assured that your financing is safe and secure.
Financing that is not bound to federal regulations work in the small business owner’s benefit. These regulations result in extreme wait times to access funding, and unreasonable qualification requirements.
Through alternative business financing methods, small business owners have the security of knowing their deal is safe, without going through the amounts of red tape necessary to access funds from lenders such as banks.
Information Needed for Your Application
All you need to include in your secure online application is:
- Your name and phone number
- Email address
- The name and address of your business
- Yearly gross sales
- Your desired loan amount
- Time in business
- The type of industry you’re in
- Your credit score (Optional)
- And how you intend to use your financing!
After that, a Business Financing Advisor will contact you in minutes to learn more and will consult with you in finding the best loan for you and your business goals.
10 Reasons Why National Business Capital & Services
Offers the Best Small Business Financing
|Paperwork||– 2-3 Years Tax Return|
– 2-3 years Financials
|– 3-6 Months Bank Statements|
– 1 Year Tax Return
– 1 year Financials
|– 3 Months Bank Statements|
– No Tax Returns Required
– Paper Intensive
|– One page – One Minute|
|Number of Lenders||1||1||75+|
|Service Level||Processor||Programmatic||Personal Advisor|
|Speed to Funding||Months||Days/Weeks||Hours/Days|
|Collateral Requirements||Always||Sometimes Required||Not Necessary|
|Business Profitability||Last 2 Years||Sometimes Required||Not Necessary|
|Credit Score||680+FICO||600+FICO||No Minimum FICO|
|Credit Check||Hard Pull||Hard Pull||Soft Pull|
Why Choose National Business Capital & Services for a Small Business Loan?
Better Terms. Faster Funding. Easier Process.
National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.
Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real-time to give you easy access to the best low-interest SBA loans, short and long-term loans, and business lines of credit, as well as a full suite of revenue-driving business services.
We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!