Compare These Top Vendors for Small Business Loans

How Do Small Business Loans Work?

Regardless of who you are or what your endeavor is, starting your own company may often require a small business loan.  You can get this loan through a number of places. You’ll want to choose a lender that can cater to your specific needs, which will depend on a number of circumstances. Before continuing you’ll need to assess what your financial requirements are. Ask yourself:

• Where do you project the business to be in 6 months?
• What is needed to get to that place?
• What do you foresee getting in the way?

Once you have a good idea of your financial situation, use this checklist, provided to you by Entrepreneur.com, to get the necessary documents together. Finally, research your options to find the loan that will best suit your business needs.

Government Small Business Loans

The US Small Business Association (SBA) provides small business loans to millions of Americans looking to build or grow their small business dreams. The SBA partners with local banks and credit union institutions to provide funds whose payback might otherwise be considered too uncertain.

These institutions have guaranteed financial backing through the government, which enables them to then lend you capital risk free. Thanks to various SBA programs, you can choose from three different loans, each catered toward a particular business or financial need.

• Microloan: These small, short term loans are for small businesses that need working capital, furniture, inventory or supplies. These funds cannot be used to pay off previous debt. You can borrow up to $50,000.00, yet most Microloans given are for much less. You will acquire this loan through an intermediate lender. To find the intermediate lender in your area, check the Small Business Association Loan Offices website.

• CDC/504 Loan Program: This much larger loan was created as means for communities to further develop through small business success. As a much larger loan amount, up to $2.0 million, there are very specific financial qualifications. To receive this loan you must be a company for profit with no more than $7.5 million in net worth, or more than $2.5 million net income after taxes for the past two years. You can apply for this loan through your local Community Development Company (CDC).

• 7(a) Loan: If you are a small business with specific requirements, you can find your government lending options here. If you are an exporter, have been impacted by the North American Free Trade Agreement (NAFTA), or a small business struggling in a rural area affected by population loss or high unemployment, you qualify for this loan. This lending is part of SBA’s initiative to reach out to those in dire situations where lending may be nearly impossible. By working with local financial institutions, they are making such loans a reality. You can check with your local bank or credit union to apply.

Small Business Loans for Women

There are a variety of businesses that want to service only female owned or built companies. The US Department of Commerce noted in a statement, “The growth of women-owned businesses, and their performance as job creators at a time when other privately-held businesses were losing jobs, testifies to the importance of women-owned businesses to the economy.” Because of this, many privately held companies, and the SBA, have come to the forefront, supporting small business loans for women.

• Private financial assistance programs: These were created specifically for women looking to build their businesses. Companies such as The Women’s Venture Fund make the process simple and provide a level of understanding for those needing small amounts of lending. Many of these businesses will conduct an interview process where your business plan, target market and business concept are discussed and reviewed. See our approved list of business plan vendors to get started with your development.

• SBA backed lenders: There are various lenders that specialize in female specific small business loans. These lenders help to make the government loan process easy to understand, and centered on the female business owner. Companies like CIT offer loans such as the 7(a) and 504 specifically to women. With toll free numbers and easy online qualifications, you can find the right loan for you. Many Credit Unions and federally chartered banks also specialize in small business loans for women.

Small Business Loans for Bad Credit

As a startup with bad credit, you may be hard pressed to get a loan through the traditional methods. With a rocky financial history, or no collateral to put down, financial institutions will rarely lend you the funds. There are private lending businesses on the market that will loan to you in various forms, regardless of your credit. These can be beneficial to you in a number of ways.

• Merchant cash: This can be an even better option than those of a traditional loan situation. Often, your payback plan will fluctuate with how your business is doing, which gives you a more flexible payback period. Companies such as United Capital Source offer cash in 72 hours. The catch is that, to do this, you sell a lump sum of your future credit card sales. The lender will take a percentage of those sales until the debt is repaid.

• Payday loans: Payday loans offer a smaller amount of money, but they promise quick cash. While these can be more risky, there are lenders on the market that can be trusted to provide you with the necessary funding quickly and easily. These lenders are not backed by anyone, and may have high interest rates. Before working with a payday lender, always be sure of their fees and rates.

However, because you are getting funds through a company not backed by the government or large financial source, you should be wary of dangerous scams. “…There are false vendors, claiming loans without any account requirement or extremely low interest rates who promise great deals, but simply run off with your private information,” said Paydayloanmag.com. Always do your research before getting involved.

Upon starting a small business, funding is almost always necessary. Regardless of you or your business, you can find reliable loans to provide you capital. With small businesses growing at a rapid rate, don’t let a lack of money keep you from achieving your business goals.