Starting your own company can be a daunting but rewarding process. While a great business plan is crucial for founders, financing is one of the most important elements a company needs to succeed.
However, financing a startup or small business can be a difficult, drawn-out process, especially for those with poor credit. While there is no minimum credit score you must have to get a business loan, traditional lenders have a range they usually consider acceptable.
If you have a low credit score and no collateral to offer, consider an alternative loan. In this article, we break down 11 small business funding options, examine the benefits of alternative lending and provide tips on how to finance your business.
Capital is difficult for small businesses to access for several reasons. It’s not that banks are against lending to small businesses вЂ“ they want to вЂ“ but traditional financial institutions have an outdated, labor-intensive lending process and regulations that are unfavorable to local shops and small organizations.
The difficulty of accessing capital is exacerbated because many small businesses applying for loans are new, and banks typically want to see at least a five-year profile of a healthy business (for instance, five years of tax data) before extending an offer.
Alternative financing is any method through which business owners can acquire capital without the assistance of traditional banks. Generally, if a funding option is based entirely online, it is an alternative financing method. By this definition, options such as crowdfunding, online loan providers and cryptocurrency qualify as alternative financing.
There are several reasons why small business owners might turn to business loan alternatives. Here are three of the most common.
If your small business needs capital but doesn’t qualify for a traditional bank loan, certain alternative financing methods and lenders may meet your needs. Here are some of the top financing options for startups and small businesses.
There are thousands of nonprofit community development finance institutions (CDFIs) across the country, all providing capital to small business and microbusiness owners on reasonable terms, according to Jennifer Sporzynski, senior vice president for business and workforce development at Coastal Enterprises Inc. (CEI).
“A wide variety of applications for loans come across our desk every week, many of them from ambitious startups,” Sporzynski said. “As a mission-oriented non-bank lender, we know from experience that many viable small businesses struggle to access same day payday loans Winchester the capital they need to get started, thrive and grow.”