The best option for funding a small business depends upon a host of factors, starting with why you need the money, how quickly you need it and the strength of your financial history.
We run through the most common forms of small-business funding options to help you in your quest—and offer two good practices for identifying if a lender is right for you.
U.S. Small Business Administration
The SBA doesn’t directly lend to small-business owners; rather, it offers a federal guarantee—making it less risky for its approved lenders to write loans. Securing an SBA loan is generally easier than going directly to a bank or credit union, but eligibility standards still can be tough. SBA has set minimums for credit score, annual revenue and time in business. SBA-guaranteed loans range in size and can be used for most business purposes—including long-term fixed assets and operating capital—but some SBA programs do carry restrictions.
Traditional banks generally offer the best terms and lowest interest rates, but these loans are hard to come by and nearly always reserved for established businesses with strong financials and high credit scores. Among the types of small-business financing: term loans, lines of credit, commercial real estate loans and business credit cards.
Credit unions, like banks, offer favorable rates and SBA-backed loans, but eligibility generally requires another hoop: membership. Credit unions offer a range of funding options, including lines of credit, term loans and business credit cards.
Business owners without established history and strong financials aren’t precluded from securing funding. In fact, as traditional banks made it more difficult to borrow, online lenders filled in the gaps. Online lenders generally approve loans and distribute funding more quickly than banks and credit unions, but the cost of borrowing can be higher. Online lenders offer several small-business funding options, including MCAs, lines of credit and invoice financing.
How to evaluate a lender
Lenders don’t just give you money and go away. The one you choose will be in your life for as long as your loan is. If you don’t have history with a lender or are searching for a new one, check out the following resources to ensure that the decision you make is a good one.
- Double-check lender status
Loan companies are required by law to register before they can do business. Get in touch with your state’s attorney general office or banking regulator to make sure that a potential lender is registered.
- Search the Better Business Bureau
Search the Better Business Bureau website to confirm that the loan company is legit and in good standing. While there you also can read customer reviews and complaints to decide if a lender is right for you.
Why Choose TruFinCo for Your Small-Business Funding Needs
At TruFinCo, we know that starting or growing a business can be scary. We’re here to help. We are a correspondent lender comprised of passionate people who work with hundreds of other lenders to ensure you get the funding you need.
Our firm specializes in strategic credit restoration and consulting to guide you to a better financial future. We have a team of dedicated professionals on a mission to help clients go from feeling defeated and stressed to being empowered and on track to a brighter future.
To book a free consultation or to learn more about our financing and credit services, get in touch. We’re here to help you.