Small Business Owners Need to Understand Where to Find the Best Loan
There are several options available to small business owners who are seeking financing. Traditional sources, like banks or credit unions, can provide quality, low-rate financing to those borrowers who have excellent credit, significant business assets, and a history of on-time payments. These loans may or may not be guaranteed by the SBA, and typically provide low interest rates.
Other options include asset-based repayment loans, where a lender provides a loan based on the potential or future earnings of the business. These loans can provide low- to medium-level interest rates, but provide the distinct advantage of being able to tailor the payment amounts in direct proportion to the income level of the business. Imagine that your personal auto loan payment dropped to low levels during the holidays when you don’t have as much money. That is the compelling feature of these types of loans.
The last resource for small business financing is usually not a safe bet – the payday or short-term lender. These loans are typically borrowed against a business owner’s personal credit and have interest rates that are extremely high. With repayment terms as low as 14 days, these loans typically do not provide the flexibility the borrower needs.
Interest Rate Isn’t Everything – Finding the Right Loan Is
For those who have attempted to secure a small business loan through traditional means, the process can be exhausting. Low interest rates are great, but if those loans are so difficult to qualify for, what is the point? In the end, a borrower has to find the loan that is the right fit for his or her business. This means a loan application process that is simple, quick, and fair. This means underwriting guidelines that allow those with stable businesses and solid business plans to secure the financing they need to make their businesses even better. This means quick funding to ensure these businesses can solve their short- to medium-term cash flow issues quickly. Interest rate isn’t everything – but it is a consideration to make when weighing the various loan options.
Think about the interest rate scenario in real world terms, though. You have payroll to make and you can secure a quick online small business loan with a moderate interest rate and keep your team happy. Or, you wait two months to complete the lower interest rate SBA loan through a bank, in which time your employees have left and your business is failing. Rate isn’t everything, timing is.
Quick Isn’t Always Better, But Slow is a Killer in Business
Traditional lenders take a long time to approve a loan – and they don’t approve as many as most would like. Payday lenders practically throw money at you, mainly due to the fact that they are making so much money off of you in such a short amount of time. Online business loan providers offer the best of both worlds – manageable interest rates, quick turnaround time and high approval rates. Slow movement is a killer to businesses who need to shore up their cash flow – don’t wait for the lowest rate while your business is failing.