Start-up businesses face many challenges when they start looking for business funding. Traditional lenders offer a process that is so slow, too manual and so risk-averse that small businesses don’t stand a chance. Because of this, small business owners have begun looking for reliable sources of funding elsewhere – ones that are willing to extend capital to a newer venture. If you are currently in need of extra capital to take your business venture to the next level, consider the following funding tips.
- Take a look at your business’ finances. Before you pursue your options any further, take a little time to review your records. You want to be sure that your business is correctly positioned for loan approval. You will find that the majority of lenders you talk to will require documentation that consists of a history of strong performance, which then translates to a high likelihood of repayment.
Keep in mind that it is crucial that you separate your personal finances from your business finances. Without this separation, you will not be able to illustrate the financial strength of your business. To organize your finances, consider using a bookkeeping tool like QuickBooks. These tools can help you easily document your income and expenses.
- Think twice about borrowing from family and friends. Many entrepreneurs turn to family and friends or choose to self-fund their ventures through personal savings or credit cards. The advantages of borrowing from family and friends is that these individuals know you best; they see your talents and strengths and are willing to support your vision. Keep in mind that there is an emotional risk to this funding choice. What if your business does not work out? Will there be hurt feelings? When blending business with personal, a delicate balance is definitely required.
- Use credit cards with caution. Credit cards have become a popular way for entrepreneurs to fund immediate business expenses. Credit cards provide quick funding and point-of-sale access for any business needs. However, depending on the business’ goals, credit lines are often too low to make a significant impact. In addition, many entrepreneurs see a huge drop – for those that use more than 50 percent of their credit lines – in their credit scores. While credit cards can be a reliable cash management tool, it is important to keep in mind that they can also limit large growth plans.
- Don’t put all of your hopes on a bank loan. In the past, other than extensive paperwork, applying for small business funding with a bank was not a complicated task. Today, if you are lucky enough to get a small business loan from a bank, you will enjoy a lower interest rate than most other options you can find. The disadvantage is that banks seek loans where they lend larger sums – more than small businesses seek; this leaves many small businesses feeling like anything but a priority. Lengthy review timelines and endless documentation requirements are also discouraging.
- Consider online lenders’ merchant cash advances. For some businesses, working with a bank is not an option. If your industry is categorized as being “high risk”, a bank will more than likely turn you away. When this occurs – or if you are simply looking for a better option – take a look at the long list of online lenders that offer their services to “high risk” businesses, like FAM.
Working with an online lender means you will be working with a modern age, technology-enabled lender. They offer greater flexibility and speed than any other traditional funding method you can find. Instead of waiting weeks only to be turned down, you apply online and have their decision within minutes. You simply need to do research on interest rates, since some online loans involve higher interest rates than traditional bank loans.
If finding business funding has been an obstacle for you, consider what a small business loan from First American Merchant can do for your business in the way of growth and flexibility. The application process is fast, simple and hassle-free. Don’t wait weeks on end for an answer from a traditional lender. Receive your answer from FAM quickly, and secure the funding you need for your business.