No ship has ever sailed through calm waters. Every captain that has ever set on a voyage has come across troubled waters and extreme weather. These challenges only increase their knowledge and experience. The same is the case in the business world. There is no business in the world that has never faced trying times. There comes a time in the life of every businessperson when the chips are down and they desperately need a helping hand to bail them out of the conundrum.
Things start to look bigger and darker during hard times. This is where your leadership qualities are tested as a business owner. This is where you have to come up with the goods to steer the business out of the red zone. Such decisions have the potential to either make or break your business’s future. Let’s take a look at some of the financing options that can help you bail out your small business.
- Go For the SBA Financing Option
Not a lot of lenders would want to take chances with smaller businesses. They don’t like to park their money with smaller companies because they believe the repayment failure could be a more likely scenario. Especially, when the world is going through a financial downturn due to the novel coronavirus pandemic, it is not as easy to obtain a loan as it was a few weeks ago. However, the US Small Business Administration-backed loans are still available to small and medium-sized businesses. There are many reasons why SBA loans are high in demand. In order to obtain an SBA loan, your business should qualify as a small business in your particular industry. You may also need to meet the loan eligibility criteria that vary on various types of available loan options. Since the SBA doesn’t provide the loan directly, you have to qualify and apply for a hard money business loan with bad credit from a financial institution.
- Ask Your Friends and Family
If you are not in a mood to pay interest rates on your obligations, the best choice is to ask your friends and family members for a loan. There are many people around us whose bank balance is quite healthy. You may discuss your requirements with such individuals and convince them to invest their money in your business. This way you won’t have to pay the interest rate, besides, you can have a helping hand in your friend or family member to assist in your business affairs. It is a win-win situation for both parties because money resting in a bank account is adding no value for your friend. This is generally the case with most of the entrepreneurs, especially during the first three years of their business. They consider it a safe bet to finance their business needs.
- Obtain a Microloan
There can be a multitude of reasons why a bank would show reluctance in resting their money with your business. It could include the absence of credit history, poor credit score, lack of collateral, or failure to obtain a loan from the bank. Despite all the roadblocks, you can still go for a microloan that can be in the range of 500 USD to 35k USD. Since the size of microloan is not that big, lenders generally don’t bother much in releasing the funds to the borrowers. So if your financial need is not that huge, you should consider turning to a microlender. They require lesser documentation, hence their approval time is faster than many other options out there. Moreover, their underwriting criteria is not that tough. One downside of a microloan is that microlenders generally charge a higher interest rate than traditional banks.
- Obtain a Bank Loan
As we all know, the whole world is facing a massive financial downturn in the wake of the novel coronavirus. It has led to stricter lending standards across the globe. However, top financial institutions like Bank of America and JP Morgan Chase have dedicated funds for small businesses. You may always reach these banks to obtain a business loan that delivers the right results for your business.
- Sell Your Receivables
Have you ever thought about factoring? It is indeed a great choice for small businesses whose money is stuck with their clients. Yes, businesses generally have to deal with the clients who are either late on their payments or who have no means to pay off your receivables. Factoring comes as the right loan product for such businesses. You can easily sell your receivables to get your stuck money upfront but at a discount. You won’t get all the money but a percentage of that outstanding bill. It is generally considered an expensive way to generate funds. Nevertheless, it is still a better option than waiting until the doomsday to get your money bank from your client.
THE FINAL WORD
Obtaining funds for your promising business in today’s business climate is not a walk in the park. It is indeed a tall challenge that can be dealt with proper management and planning. You need to be on top of your game as an entrepreneur and know where you stand and which loan product would suit your business needs. This way you can easily design your loan tenure with a plan that allows you to focus more on your business growth rather than wasting time on managing the outstanding loan. There are also options for start up Business Loan with bad credit.