GET A SMALL BUSINESS LOAN Almost every small business will need to apply for a small business loan at some point. Almost every business owner asks the same question, “how to get a business loan.” You may have noticed that the banks aren’t always helpful. Unless your financial records are impressive enough to amaze Bill Gates, most traditional lenders will treat you like a disaster waiting to happen. You may be wondering is it easy to get a business loan. Thankfully, alternative financing options are available. There are a few important points to consider before you sign on the dotted line. The following tips and considerations should help you as you compare your options. How to Get Approved for a Business Loan with Bad Credit Credit Worthiness Before we get into where to get a business loan and the different types of small business loans that are available, it’s important to first understand how lenders work. For starters, most traditional lenders (i.e. banks) will judge your credit worthiness as a borrower before making a final decision about your loan. Your personal credit worthiness and credit limits can have an impact on areas such as: • Interest rates • The amount of the loan • The loan repayment period Creditworthiness is a historical perspective on your ability to repay a loan. This is commonly summarized by a three-digit number known as your personal credit score or FICO score. There are 5 factors that comprise this score. They include your payment history (35% of the score), the amount owed (30% of the score), the length of credit history (15%), credit mix (10%), and new credit (10%). Virtually all traditional lenders will use this bar as a barrier to a business loan. Usually it requires a minimum score of 720, however, it may go as low as 680. How to Get a Business Loan Without Assets Even in best-case scenarios, traditional lenders will often require collateral or assets on top of a high credit score. You will increase your chances if you provide some type of security including homes, cars, cash, investments, etc. Another indicator that is often overlooked by most small business owners is the business credit score. How to Get a Business Loan with No Business Credit If your business’s credit score or Paydex score is less than perfect, the lender may also require a down payment or a personal guarantor. Take the time to read “The Secret My Lawyers & Accountants Didn’t Even Know About…” In this article, we outline what it takes to get a business loan, even if you have poor personal credit and no business credit history. There is a 7-step process that if you take the time to follow will all but guarantee that you get funded. How to get your business loan approved? You should also follow that up with these two articles. Simplistic & Powerful ways to get a Small Business Loan by Sunwise Capital on April 13, 2016 in Uncategorized How to Build Your Business Financial Foundation in Order to get a Small Business Loan. These are insider strategies given to you courtesy of Sunwise Capital. We begin by first looking at your setup structure – starting with the name of your business. Even if you are already incorporated or have been in business for… Continue Reading So how do I get a small business loan? by Sunwise Capital on April 13, 2016 in Small Business Loans How do I get a small business loan? Step 1: It all starts with you! The first place to begin is with your personal credit. Many small business lenders look not only at the business’ ability to repay a business loan, they will look at the individual business owner’s credit profile applying for the small… Continue Reading The financial crisis changed everything Since these demands of banks and traditional lenders are often difficult to meet, many businesses are now turning to alternative lenders. Alternative lenders value cash flow over credit score, and collateral is almost never required. Many do not require the traditional personal guarantee as well. Financing your business with one of these business lenders is a more popular option in today’s marketplace. They usually have a wide range of loan programs and have reasonable rates. Many times, all you need is to give them your basic company info, a one page application and your business checking account statements to get a quick approval. Rarely do they require your tax returns. Most will base a big part of their decision on your company’s cash flow. What is the Difference Between Debt Financing vs. Equity Financing Before seeking out funding, business owners should understand the difference between debt financing and equity financing. This is business finance 101. Debt financing is just your standard business loan. These loans need to be repaid based on the terms of the agreement, which will vary depending on the type of lender. For instance, with a traditional lender, you’ll usually start paying back the loan 30 days after receiving it. If you go with an alternative lender, you might start making payments the very next day. It depends on whether you get approved for a loan with daily, weekly, or monthly payments. Rarely do you have a choice; however, some lenders may be a little more flexible than others. Alternative lenders also have more flexible term periods for small business loans. While a traditional bank will usually set up terms ranging from 3 to 7 years, an alternative lender may allow you to set up a business loan for as little as 6 months. While it seems logical or even appealing to get a loan with the longest time period (which means the lowest payments), it’s not always advantageous for you to have a long loan term. Is it easy to get a business loan? It’s certainly easier to get a business loan with a shorter term. Why? Very simply – less risk for the lender. You’ll also get the most aggressive or lowest rates. Let me give you an example as to why these are easy business loans to get and why these make so much sense. Let’s say you want to run an advertising campaign for the next 3 months. You know that for every dollar you spend you make fifty cents. The 3 months of advertising generates business for the next 6 months. My question to you is why would you want to pay for advertising that is no longer useful for the next year, two or three? Why pay higher rates for a longer term if it’s beyond the useful life of the investment? I hope this makes sense. The Truth About Debt Financing vs. Equity Financing Back to debt vs equity financing. Unlike a business loan from the financial institutions, equity financing involves obtaining funds from an investor in exchange for part ownership of your business. In other words, you get the money, and they get a percentage share of your business. Debt financing is a set amount over a set period of time (term) with a very defined repayment schedule. You’ll know exactly how much you borrowed and how much you need to repay. Depending on the amount of risk that’s perceived by the investor or sometimes depending on how desperate you seem, you may have to give up over half your business in terms of equity. Here’s how I explain it. The difference between the loan or the debt financing and giving up equity works like this. Assumptions. Your business grosses $1M a year. You need $100,000. Your margins are 25% so you net $250,000 on your $1M in gross revenue. With me so far? A small business loan may cost you between $15,000 and $35,000 in interest. So regardless of how long it takes to repay whether it’s 6 months to 48 months, you’ll know exactly what it means to you. The only question I’d ask is what are you doing with the money? Or better yet, what will it do for your business? That’s the answer to the Return on Investment or ROI question. Just to keep it simple, by comparison, let’s assume the investor is willing to give you the $100K, however, he or she requires 50% of your business. Fair enough. Now since you are 50-50 partners, your investor is entitled to 50% of your net profit. You just gave yourself a fifty-percent reduction in pay. OK. You needed the money and maybe you can negotiate a better income. Let’s say the investor will compromise and give you a $200,000 a year salary and now you’ll split the remaining $50,000. It’ll cost you $25K a year for the equity loan. Here’s my $25,000 question. How long are you going to keep the business? Five years? Ten? More? Your cost of funds at the end of 5 years is $125,000. More than double what you received. At the end of 10 years, it’s $250,000 and that is a good hunk of your retirement. You get my point. A few things here. You’ve probably forgotten more than your investor will ever know about your business. Next, the likelihood of an investor coming in after you need the money for less that 501% is unlikely, but not impossible. Lastly, when you have a “money” investor you’ve just hired yourself a new boss. Think about what will happen if things soften up a bit. Guess where the first cut happens. You’ve got it. You! I’m not against equity partnerships. You must make that decision yourself. I’ve had some that have worked out extraordinarily well and some that were my worst nightmare. Back to the business loans. Since our focus is on small business loans, we aren’t going to elaborate any further on equity financing. We just wanted to point out the difference between the two major types of funding. Types of Funders There are different types of funders that are available for small business loans. You should know the difference between the major players before you apply for your business loan. Banks Banks typically offer more financial products than credit unions but usually charge higher rates. Approval rates are also extremely low. They require a tremendous amount of paperwork including business plans. Established businesses must be prepared to provide financial statements show them a plan for the future to repay the bank loans. Credit Unions Credit unions usually offer much lower interest rates, loan fees, and discounts to their members than banks do. SBA Loans SBA 7a loans are through a federal agency that offers business assistance and support to small business owners. The 7a loans services include business loans, business loan guarantees, government contracts, business counseling, workshops and other forms of support for small business owners. Sunwise Capital works direct with one of the top 5 SBA Lenders in the country and can help you with the SBA forms. We can also fund commercial real estate loans through the SBA programs. Hard Money Lenders Hard money lenders typically provide short-term financing for individual projects with a short turnaround time. The asset—such as a home or other property—is usually involved in the transaction and used as collateral. Hard money loans are commonly used in real estate transactions. Investors Although there are some investors who make small business loans, most provide equity financing in exchange for a percentage share or part ownership of the business. Alternative Lenders After the financial crisis of 2008, traditional loans became much more difficult for small businesses to get. As a result, independent online lenders started offering the types of loans that were otherwise out of reach for many businesses. Since they’re not bound by the same restrictions or regulations as banks, alternative lenders can offer more flexible terms, easier application processes and higher business loan approval rates. For you the consumer, these are fast easy business loans. Types of Small Business Loans There are many small business loan options based on the needs of the business owner. Some are based on specific industries while others are based on standard operating needs. Several of the more common types of small business loans are listed below. How to Get a Business Loan to Start Your Business Startup Loans Startup funding, also referred to as seed funding, is money provided to launch new business ideas or a new product. Many startup loans are acquired through alternative lenders. This is because bank loans are difficult to get without long-term financial records. Few loan providers will take a risk on a pure start-up. Angel investors or venture capital is one option. Perhaps the best alternative to fund your business is friends and family. How to Get a Business Loan as a Veteran Veteran’s should visit the Office of Veterans Business Development if they are starting a business. The OVBD is all about entrepreneurship, and business ownership and is a great business resource. Naturally it makes sense to explore all your loan options. This may include friends and family, traditional financial institutions and the online lenders also known as alternative lenders. Explore the loan options below as well as the small business loans listed here. How to Get a Business Loan as a Minority According to the U.S. Census Bureau, minority owned businesses are growing faster than any other segment of the small business market. Entrepreneurship is flourishing in the minority owned businesses and now represents almost one-third of all small business ownership. States like Texas and California are over 50% minorities. Access to capital loans sources are similar between minority and nonminority owned businesses. Business startups for both groups rely on family and friends as well as personal savings for most startup capital funding. Business Loans are available for all business owners to expand their companies. Working Capital Loans Loans provided for working capital are usually given to assist business owners with their day-to-day operations and normal overhead costs. They are rarely used for long-term assets, however. Merchant Cash Advance The easiest small business loans to obtain is the merchant cash advance. It truly is one of the simplest options for many businesses. Why? One big reason is even if you have poor credit you use this financing option to grow your business. Do you want to get a business loan fast? Get this type of loan. You make manageable daily payments based on your credit card sales, and the business loan is typically paid off in under 2 years. Seasonal Loans Some businesses experience higher sales during their peak periods but may experience a decrease in sales during the slower months. Funding obtained during these slow periods can keep the business afloat until the busy season rolls around again. Equipment Loans As the name suggests, an equipment loan is funding to be used specifically for equipment related to the business. Revolving Line of Credit A revolving line of credit consists of funds that are made available and can be borrowed again, usually after all or a portion of the loan has been repaid. The purpose of the line of credit is so that business owners can have funds readily available on an as-needed basis. SBA Loans The U.S. Small Business Administration provides government loans to small businesses to help promote economic growth. These small business loans must be used 100% for business purposes. Stick with the Alternatives for Your Business Loan It’s important that business owners always have access to cash to cover any immediate cash shortage issues. Unfortunately, banks are lending less and are less willing to work with small businesses. If you’re tired of having the door slammed in your face due to a less-than-perfect credit score or other factors, it may be time to reach out to an alternative lender for your business loan. At Sunwise Capital we make it easy. It’s that simple. We can show you how to get a business loan in 24 hours, sometimes less. So if you need a small business loan for growth or expansion, or perhaps payroll or advertising, we can help. EASY BUSINESS LOANS WITH MORE MONEY, BETTER RATES, BETTER TERMS Do you want a fast business loan? Most of our clients are surprised at how fast easy it is to apply. In fact, to get a business loan, all you need is our simple one-page application and the last 3 months of business bank statements. That’s it. That’s how to get a fast and easy business loan from Sunwise Capital. GET FAST APPROVALS, FASTER FUNDING ON YOUR BUSINESS LOANS Need a small business loan up to $100,000 fast? We can approve your business loan in 24 hours and fund you same day if necessary. Need more? Typically, all it takes is 2 to 3 days to fund you up to $250,000. Still need more? Give us just another day or two and we can get you a business loan amounts up to $500,000 and for those qualified, loans up to $2M. EASIEST SMALL BUSINESS LOANS TO OBTAIN WITH FLEXIBLE RATES AND FLEXIBLE TERMS We will work with you on making sure your business loan works for you. Our small business loans offer daily, weekly and even monthly payments. We have business loans as short as 6 months and some of our business loans will go out for 5 years. Call 888.456.9223 to speak to one of our professional funding advisors who will help you determine how to get a business loan. Ready to Apply? CLICK HERE. Either way, we believe Sunwise Capital will help you figure it out. Need more proof? You will find our client’s success stories at https://www.sunwisecapital.com/reviews/.