2020 Lending Options for First Time Business Owners

February 2020

You’ve got a great idea for a business; you’ve done your research and you know there’s a need for your services or goods (and the market isn’t oversaturated with other businesses filling that need). You’ve created a business plan, and you’re ready to go – but you need funding.

## Traditional Loans

If your business has no financial track record your score will be used to gauge whether a bank can risk approving your loan. If you have an excellent credit history, and your business has already been open for at least a year, you can apply for a loan through your bank or credit union.

But even with a perfect credit history, your loan needs may not be big enough for a bank to bother with. If you get turned down you may want to look into SBA-guaranteed loans. What happens with an SBA-guaranteed loan is that the Small Business Administration promises to pay back a large portion of your loan to your lender if you default. But obviously, the SBA is not interested in guaranteeing loans for people with less-than-perfect credit scores.

## Microloans and grants

If you haven’t opened your business yet or have been in business less than 6 months and your personal credit history isn’t excellent, you may have an easier time getting funding from alternative sources. You can investigate microloans. You can explore grants that are available to you – perhaps you’re a veteran, or your business offers services/goods that your local community needs to flourish, or you meet other specific criteria.

Your eligibility for more alternative startup business loans like grants, crowdfunding, or friends and family will depend less on your credit score and more on the details of your business—like what your business model is, who your customers are, what community you operate in, and so on. Try googling for “grants for xxxx” with xxx being a specific descriptor of you and/or your business and location – e.g.: “grants for technology startups in xxx city.” And, by the way, if you are involved in technology or science, you can also explore federal loan programs like STTR.

## Line of Credit

You can also think about establishing a business credit line that you can draw from when needed. In general, you may want to apply for a business loan if you need a large amount of money in one lump sum to finance expansion, inventory, equipment or other significant expenditures. If you need to have extended, ready access to funds to manage short-term cash flow issues, or to finance activities such as a marketing campaign or seasonal hiring, a line of credit may be a better choice.

But qualifying for small business line of credit can be challenging. You’re more likely to be approved if you have an excellent credit history, have been in business for at least two years, and can show that your business revenues are growing. But, if like many small business owners, you don’t qualify for a credit line that would enable you to do much of anything, you still have options.

## Alternative Funding Sources

Another excellent option for early-stage funding are alternative funders, which tend to be more focused on the future profit potentials of your business as opposed to your past credit history.

Alternative funding sources provide working capital and other forms of financing for small and medium-sized businesses whose owners need to access funds quickly and/or don’t qualify for more traditional loans from a bank. Business owners don’t need to have perfect credit scores to be approved for funding. Plus, the application process for alternative funding is likely to take minutes, not months. And the types of funding available, such as merchant cash advances- are designed to meet the needs of smaller businesses. Once approved – you often can access the funding faster – in days rather than the month or more that it takes to access funds from a traditional bank loan.

## How do I find an alternative business funding source?

One Park Financial works to help owners of small and mid-sized businesses access the funding that meets their needs. Established in 2010 and founded by entrepreneurs, One Park Financial understands the challenges associated with small business loans and their need for working capital. Visit oneparkfinancial.com or call 855.218.8819 and connect with a funding expert to discover the options that make sense for you and your business.

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