For entrepreneurs who are looking to start a business, small business financing can be tricky. Much like an individual with no established credit rating might find it difficult to get a mortgage, small businesses just getting ready to launch have no proven income history to support their request. Therefore, they often end up paying higher rates on loans, if they can procure financial support at all.
Even established businesses with a proven history, who might be looking to expand their operations, may find it difficult to secure capital through traditional lenders. With that in mind, here are a few financing options small businesses might want to look into when getting established or expanding operations:
- Alternative or online lenders: Traditional lenders like banks may have strict guidelines to establish their underwriting policies. Often, these are very inflexible and do not take any information into account that doesn’t fit nicely into their calculations. Alternative and online lenders often have more relaxed rules to provide greater flexibility in the loans they are willing to approve. However, small businesses may pay a higher rate on a loan when using these kinds of sources.
- Borrowing again retirement: In some cases, you can borrow against your 401(k) or individual retirement account (IRA) for qualified loans, without incurring the penalties that normally are charged to early withdrawals. Ask your tax professional for assistance to see what options you have available.
- Crowd sourcing: The Internet has made it incredibly easy for anyone with a great idea to pitch their thoughts to the world and ask for funding through donations. There are also some services that connect investors looking for breakthrough products/services to fund. In return, they normally receive a percentage of your company’s profits over a specified period of time.
- SBA 504 loans: The U.S. Small Business Administration wants to make it easier for business to get started and prosper. Through the SBA 504 loans, small business owners can purchase land, equipment and/or real estate with only a 10% down payment.
504 Capital Corporation specializes in SBA CDC 504 loans for small businesses in Maryland, Virginia, and North Carolina. Contact us and let us walk you through the process of getting financing for your small business need.
