When you own a small business, it can be difficult to get the capital you need to grow. Margins may be tight, so you have to look elsewhere for extra cash.
Unfortunately, traditional loans aren’t designed to meet the needs of small businesses. Oftentimes, banks don’t want to take the risk of lending to smaller enterprises. If you’re in this situation, you may want to consider alternative lending options such as the following.
Unsecured Business Loan
Perhaps the best thing about an unsecured loan is that you don’t have to risk assets since there’s no collateral necessary. It may also be easier to get an unsecured loan with an alternative lender than a secured loan with a traditional lender. For example, if you’re a startup, a traditional lender may not approve a loan because you don’t have an established credit history. An alternative lender, on the other hand, might be more interested in a share of the company than a credit score.
SBA Express Loan
While the Small Business Administration doesn’t offer loans directly, it facilitates lending to smaller businesses by supporting financial institutions that underwrite the loans. One popular type of loan is SBA Express, which provides longer repayment terms and very low-interest rates.
These loans are typically easier to get approved for as well. Since they’re meant for small businesses, these loans have more attainable requirements.
If you already have a big following or if you’re internet-savvy, crowdfunding could be a good alternative lending option. How does it work? Crowdfunding relies on small donations from a lot of people to make a target goal.
These work best for a particular project, as there are some legal restrictions on how businesses can use capital from crowdfunding sources. However, if you’re a startup asking for capital to create and sell a particular product, this is an excellent strategy.
Revolving Line of Credit
A revolving line of credit is the loan that keeps on giving. There are several benefits to having this type of loan, especially if you need flexible spending options.
First, you don’t have to take a lump sum. You can borrow funds when you need them until you’ve reached the loan limit.
Second, because the used amount fluctuates, so does your payment. If you haven’t drawn on the loan, you don’t have to pay anything.
Finally, once you’ve paid back the amount you’ve drawn, it becomes accessible funding again. You can borrow and repay several times throughout the life of the loan.