Has anyone discovered a good small business financing resource not associated with the SBA?
After starting a business, it's pretty easy to finance the first few years with credit cards... but then the interest rates starts to kill you! Crowd Funding does not lend itself well to my industry, so that is not an option. I just need a revolving credit line with a good interest rate.
If your business is profitable, you have a good credit history and you are willing to pledge the equity in your home or other personal assets, you should be be able to get a revolving line of credit from a bank at a reasonable interest rate. There is nothing wrong with using SBA (unless you are not eligible for some reason). There are substantial upfront fees but you should more than offset your credit card rates.
If you do choose to go the SBA route, it might help to go to a bank who is a Preferred Lender, i.e. they can approve the loan with an SBA guaranty without getting direct approval from the SBA.
The one thing not mentioned in these posts is the fact that you need to keep your business credit separate from your personal credit. If you are financing your business with your personal credit, when you need capital most, you will not be able to qualify for new business loans because it is you, not your business establishing the credit for your business. That may not make sense to you right now, but, when it happens it will despite how much money your business may be making. Starting off on the right foot by getting your business credit established is a big deal. Business equity sells a company on an exit over time as long as the business has it's own credit and capital when sold. If it doesn't, the value of the business is not the business, but the owner of the business which doesn't lend value to the business. The CEO or Manager lends value by its leadership, not by its pocket book.
I have a great solution for hard money loans. Up to $100k.
Contact my office and I will forward the info.
What type of business are you in?
I started my first several businesses many years ago (and still utilize this strategy today for clients) by factoring my receivables. There are dozens of merchant banks in this country that will buy quality receivables, advance funds and pay in full on collection of the invoice. Depending on credit typically costs about 1-2 pts over prime. If invoice paid in 60 days you will incur less tha 2% funding costs amortized over 12 months.
Have you considered working for someone else, gaining the experience in your industry as well as the contacts, and saving up your money. That way, you don't have to borrow.
Revolving lines of credit and the underwriting decision to grant one are based on either:
1) personal credit score - loan limits are limited and low... OR
2) the businesses operation trends, assets, future viability and a few other things.
If you are heading towards the upward trend of increasing sales and profits with a history of two years of profits, a bank line of credit should be easy provided there are no other major issues or roadblocks. Otherwise, there are a myriad of other lenders out there that will provide loans. The key question is this: Is the near and mid future looking positive or negative.
Action Items, LLC
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CJ, if you have assets, collateral, A/R, purchase orders and a history of a solid revenue stream, I might be able to help.
There is probably one in your area.
Look and see if you have a county-wide Small Business Development Center (SDBC) available to you. They are paid for by our tax dollars and are a free resource to assist you. Their advisors can help you identify sources of financing and develop a financing proposal.
Hi CJ, check out accelerator groups. You enter contests sometimes for free, sometimes for $100. Many times you can 10,000- 100,000 in financing, tht you do not have to pay back. You can also receive in kind business services. Many corps, colleges offer them. Best wishes. Deb
The alternate funding source many small companies here in Albuquerque have turned to are a handful of mostly privately funded non-profit organizations dedicated to providing micro lending, training, and guidance. [Here's a link to one of them: http://www.accionnm.org] Perhaps such organizations exist in your community as well. If so, I'd look into them.
A client came to my office today with the same question! Although the bank will still look at financials, credit, orders/contracts, etc., try your local community bank(s) as community banks tend be to more receptive to your type of situation; you may be required to open a business account with the bank.
Go to www.multifunding.com. Please tell Ami I sent you. Rob Edenzon
Equity financing -- from Friends & Family; angle funds; etc. -- is always nice if you can get it. Another way, depending in the state in which you operate, is to contact the department responsible for economic development. (For instance, in Connecticut, this is the DECD -- Department of Economic Cooperation and Development.) Most states have something like this, and generally the terms are reasonable. More specifically, you can generally get loans with very favorable interest rates. The trade-off tends to be that you are dealing with a bureaucratic organization, and therefore the reporting requirements -- the proverbial hoops you have to jump through -- are much greater than other avenues.
We took a look at your company website. We believe a business line of credit, cash flow loan or purchase order financing might work for your company. However it would depends on the your company credit, operating history and financial. Hope this help.
Different types of financing match different industries. For example, ag loans for agriculture and equipment loans for construction. What industry are you in? Also, it sounds like you just need working capital, or are you in a growth phase? Warren makes a good point. If you are in a growth phase it may be best to find a partner, or an investor.
The good interest rate is always going to be problematic, which is why the first option should always be going to the credit union or bank where your business has accounts. You can't beat a personal relationship, and if there is equity in your business or a consistent cash flow, it should not be unreasonable to expect a decent line of credit. I've worked with a number of businesses that, for whatever reason (usually some over-extension or they are at the mercy of the real estate market) cannot get the line of credit they need through their bank, and in these instances the best bet has been leveraging the power of their credit card sales to get a merchant loan through their processing company (technically, through a "partner" of the processing company). This is not exactly the lowest interest rate deal, but it is a very manageable one because the payments are tied to a percentage of the processing volume and deducted accordingly. It's often a technique that sales agents use to get a business to switch to their processing service, but it is not one I generally employ unless a merchant has specifically asked about it. Of course, this sort of option is only going to be available to businesses that a) accept credit cards for their goods or services and b) have at least three to six months of proven processing volume to base the loan on (as well as verifiable cash reserves in the bank in many instances).
You can get easier access with what are called "alternative lenders." I happen to do some blogging for this one: http://www.reliantfunding.com You don't have to use them, but you'll get a feel for what they are. This class of lender is backed by a hedge fund or private equity of some kind, so they have fewer regulations to follow. You can get a lot funding and fast, and with Reliant, you only need to do $5000 per month in revenues for a year to qualify. You can get access in just a few business days.
The caveat to all of this? Be careful for the interest rate. But, this lender says they'll work out a reasonable payment solution that works for your business. You don't have to use that lender, but it's a starting point.
CJ - There are so many possibilities, and each has pros and cons. And especially seeing that you are in the Internet area, where traditional sources often don't understand. Debt vs equity is a big issue too, and then most will probably look to your personal side also. If you want I could talk to you about this; I've been through it all, much as CFO of a similar www co. Good luck ! - Joe Kennedy, www dot swat-cfo dot com