Obtaining financing for a small business can be a real headache. That is because many of the larger banks are often hesitant to lend money to smaller companies and startup businesses that need financing. A small business owner is left searching for alternative sources to fund their day to day business names. There are a number of options available to small business owners that they may not be aware of. Let’s take a look at a few traditional and non traditional means of obtaining access to credit for small businesses.
Credit Unions
Credit unions are not only a friend of the small bank customer but of the small business owner as well. There is a big push in the credit union community to increase the amount of money being lent to small businesses. They are trying to make it easier for small businesses to get access to credit.
Credit unions specialize in small business loans and have a number of loan products for businesses that provide services to the community. The rates for credit union loans are often much lower than financing at a commercial bank and the terms may be a bit more favorable. The fees are lower and the services are often superior.
Small Business Administration
The Small Business Administration helps more entrepreneurs start businesses than any other entity in the United States. The SBA offers a number of services that improve the chances of any small business owner obtaining financing. The SBA has a number of free services that connect the business owner with potential funding sources.
The SBA does not make any loans on its own since it is not a lending agency. The SBA instead guarantees loans in the event that a business owner does not repay the funds borrowed. This increases the likelihood of a financial institution lending to a small business. The Small Business Administration also takes the time to review loan paperwork for borrowers. The SBA alone has helped millions of small businesses obtain needed financing.
Peer To Peer Lending
A new form of financing for businesses has been growing over the last decade. The Internet has provided businesses and individuals with a new form of financing known as peer to peer lending. This is where individuals can borrow money from other borrowers just like themselves.
Online lending exchanges (see my review of Lending Club) have become a good way of connecting borrowers and lenders in the same place. Companies like Lending Club specialize in helping people get access to credit by giving borrowers more choices. Lenders compete for the business of a borrower by making loan offers. The borrower gets to select from multiple offers and can get the cheapest form of financing for their business. This saves the borrower both time and money.
Small business owners have a whole lot more options than they may have thought. All of these traditional and non traditional means of financing can help any small business owner that is just looking to start a business or trying to borrow money to finance ongoing operations.
