Getting a small business bank loan is never easy, and it’s been especially difficult since the financial crash of 2008 and the lingering credit crunch. Even though small business lending is rebounding somewhat, it is still virtually impossible to get a loan to open a new business because lenders want to see a financial track record for your business that demonstrates your ability to repay the money they’re lending you.
What are your options for financing if banks aren’t willing to lend without knowing if your venture will be successful enough to make good on your obligation? Most entrepreneurs start their businesses with savings; they put startup costs on credit cards or get loans from family and friends. The void in bank lending has spurred the growth of alternative lending, which can be costly but gets money to entrepreneurs quickly and without a lot of hassle. One example of this is crowdfunding through websites such as Kickstarter and Indiegogo.
Some niche alternatives that have sprung up are less well known. For instatnce, culinary businesses can apply to the Whole Foods Local Producer loan program, which lends money to businesses making local food products. Many franchisers also help prospective franchisees with financing after home equity, which was once a common source of startup cash, plunged in many parts of the country.
Perhaps a more realistic option for you is connecting with a nonprofit microlender. A microlender is an organization that makes business loans to individuals. They typically charge higher-than-average interest rates and their maximum loan amount is usually $25,000.
Once your business has been operating for two to three years, a bank loan may be a realistic possibility. Showing your business has a proven business model with steady, paying customers can make the loan officer’s job easier when deciding if your business is a good risk. Don’t be afraid to take the plunge when it comes to starting a new business – inform yourself of the options available to you to launch your business and you’ll be up and running in no time.
Bean Counters Bookkeeping is a virtual bookkeeping business; so that you can focus on what is important, your business. www.thebeancountersbookkeeping.com