Business Loans
A Guide To Small Business Loans For Minorities
As a business owner, you know better than anyone that things can come up unexpectedly, and circumstances can change on a dime. During these moments, having secure finances can be the difference between your business expanding vs. failing. And this is where business loans can help.
You may be wondering, how do I get a business loan? While previously, business owners were constrained by the limited reach of traditional banks - especially on the heels of the financial crisis - things have changed. Gone are the days of having to wait weeks or longer for a decision on your business loan application with the local bank. It's a good thing, too, because having to wait that long can really crimp the style of a business owner trying to reach specific goals.
Thankfully, the rise of online lenders has made it their business to know how to acquire a small business loan far easier. They have opened up access to capital and enabled faster approval times so that you can be on your way to securing a business loan within a day. These flexible business options can make a difference when covering an unexpected or forgotten expense, and not force you to settle for less than ideal terms or sacrifice equity to backers.
So whether it's a gap in cash flow or ambitious expansion and hiring plans, following these steps could be the easiest way to get a business loan sooner than later.
As you consider how to get a new business loan, be sure, and do your homework. To set yourself up for success, you should have a grasp on a few dynamics. These include the community you want to operate in, your consumer market, and what sets you apart from the competition.
The lender may not delve into the intricacies of every financial decision you've made for the past 20 years. But, they will still want to know how the loan will help you to move closer to achieving your goal and how it can impact profits. Be ready.
Haste makes waste, so get your paperwork in order before you approach a lender. While you can apply to an online lender in minutes, a loan decision may come quickly. As such, you can have the funds in your bank account in a blink of an eye. But, there is some behind-the-scenes work to be done.
The easiest way to get a business loan is to prepare documents ahead of time. This can include your business tax returns for at least the past two years, personal tax returns for the past year, and business bank statements for the past six months. Your loan specialist should communicate to you what other documentation may be needed to get your business loan. If asked to securely link your bank account to the loan application, opt-in for faster processing.
Know both your business and personal credit scores before your potential lender does. This means you'll probably have to request a copy of both your business and personal credit reports.
Dispute any misinformation because the higher your scores, the better your chances of getting a business loan. iBusiness Funding recommends that if your credit score is below 600, work to bolster it before approaching potential lenders. You can obtain a copy of your business credit report for a fee by the three major providers: Dun & Bradstreet, Equifax, and Experian.
As a business owner, you're no longer dependent on the bank down the street for a loan. Now the question is: "How do I get a business loan with an alternative lender? Explore your options for alternative/online lenders, including those that are peer-to-peer and crowdfunding. By doing so, you are less likely to waste time with a potential lender that doesn't meet your business' needs.
Given their financial technology (fintech) capabilities, going through online lenders is often the fastest and easiest way to get a business loan. They can deliver both a quick response and rapid funding to your bank account. With crowdfunding, you will likely have to sacrifice equity in your business. P2P lending, meanwhile, is an efficient way to get cash quickly and repay the loan over time with interest.
But, be warned as you explore your options for how to get a new business loan: Don't get blindsided.
Not all lenders are the same, even if they are grouped in the same category. Be sure and read the fine print and compare the rates and fees of the lenders before it's too late.
One of the quickest and easiest ways to get business funding is through a business term loan. There are three types of term loans based on duration: short term, intermediate-term, and long term. How do I get a business loan that's right for me? Well, the answer to that is tied to the purpose of the loan.
Do you need to invest in more inventory? A short-term loan could be appropriate. With this option, you can redirect the sales of those products or services to repay the loan. The same goes for covering payroll or additional hiring. If you are pursuing an expansion or acquisition, however, the financial benefit takes longer to be realized. So, a medium to long-term loan that is repaid over multiple years might make more sense.
Applying for a term loan is one of the easiest ways to get small business funding.
A merchant cash advance (MCA) could be a speedy way to gain access to capital. Some MCA providers boast access to funds in as little as 24 hours after you get the green light on your application.
Keep in mind as you explore how to acquire a small business loan that an MCA is not a loan. Instead, it's a cash advance based on the cash flow of your business. Providers weigh a host of criteria, often based on an algorithm that will generally include daily credit card transactions/sales to determine whether a business is a good credit risk. Usually, you will repay the loan within a number of months, and repayments are generally taken directly from your sales.
SBA loans are facilitated through lenders and are backed by the government's Small Business Administration. A critical risk in relying on an SBA loan is being subject to the whims of the U.S. government. For instance, in early 2019, during a government shutdown, approved borrowers of SBA loans were left in limbo as policymakers hashed things out while business expansion plans were forced to be placed on hold. Business owners who were planning on refinancing or replacing shoddy carpets had to resort to Plan B as a result of the sudden uncertainty tied to SBA loans.
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