Unleash Your Small Business Potential with These 3 Financing Options

Running a small business can be challenging, especially regarding securing funding. According to the U.S. Bureau of Labor Statistics, almost 20% of businesses fail within their first year, and over 65% fail within ten years. Lack of financial support is a significant contributor to these failures. Therefore, it is crucial to know where to go for funding assistance, which CDC small business finance corporation should you go to and many other factors.

    

This blog post will explore three financing options to help small businesses thrive and how 504 Capital can help you acquire small business loans in Virginia.

Online Loans: Convenient and Flexible Funding

Gone are the days of physically visiting a brick-and-mortar financial institution to secure a business loan. Nowadays, it's much easier to find online nonbank lenders who offer business loans from the comfort of your home or office. Moreover, online loans can be utilized for various expenses such as working capital, expansion costs, debt consolidation, and purchasing inventory or equipment.

Online business loans often have more lenient approval criteria than traditional bank loans. According to Federal Reserve data, before March 1, 2020, 81% of business loan applicants were approved for some funding with online lenders. While this percentage dropped to 55% after that date, it is still higher than other financing sources. The main advantage of online loans is their speed and flexibility in funding, assuming your application is approved. 

Traditional Bank Loans: Stability and Affordability

Business loans from traditional financial institutions, such as banks and credit unions, have been a prevalent solution for borrowing money. Well-qualified borrowers can benefit from the relatively lower interest rates these institutions offer.

However, it can be challenging for some businesses to qualify for bank loans, especially startups or those who still need to establish business credit. Even personal credit scores can present obstacles when applying for this type of financing.

SBA Loans: Affordable and Government-Backed

Loans backed by the U.S. Small Business Administration (SBA) offer an affordable financing option. With SBA loans, the federal government guarantees a portion of the loan, making lenders more comfortable approving borrowers who might otherwise be considered risky investments.

While the SBA itself does not issue loans, you can apply through an SBA-approved lender. However, similar to traditional bank loans, qualifying for SBA loans can involve numerous requirements and hurdles. If your business meets the necessary requirements, you can borrow up to $5 million through SBA loans with repayment terms that can extend up to 30 years. Also, it gives you leverage to secure financing with a down payment as low as 10% of the loan amount.

How to Decide the Best for You?

Determining the best financing option for your small business requires careful consideration of various factors. Here are some key points to help guide your decision-making process:

• Assess Your Business Needs: Start by evaluating your specific funding requirements. Consider the purpose of the loan, whether it's for working capital, expansion, or equipment purchase. This will help you understand the amount of funding required and the repayment terms that align with your goals.

• Evaluate Your Qualifications: Take an honest look at your business and personal qualifications. Consider factors such as your credit score, time in the industry, and financial stability. Different financing options have other qualification criteria, so choosing one that matches your profile is essential.

• Compare Interest Rates and Fees: Carefully analyze each financing option's interest rates and fees. While online loans may offer faster funding, they often come with higher interest rates and fees. Traditional bank loans may have lower rates but stricter eligibility requirements. SBA loans generally offer competitive interest rates but involve a lengthy approval process.

• Consider Repayment Terms: Evaluate the repayment terms offered by each option. Some loans provide flexibility with more extended repayment periods, while others require shorter repayment terms. Assess your cash flow projections and choose a financing option that allows you to meet your repayment obligations comfortably.

Conclusion

Selecting the right small business loan may seem overwhelming with the many options available. However, you can quickly narrow your choices by thoroughly evaluating your business requirements. These three options offer varying advantages and considerations regarding financing options for small businesses. 

A reliable partner can empower you to make decisive choices in small business loans in Virginia and will safeguard the future of your business.Trust is key in this process; we're here to provide it. If you're in the VA, MD, or NC areas, consider contacting 504 Capital for guidance and support in securing small business loans.

FAQ

How can I apply for an online business loan? 

Applying for an online business loan is a simple process. You can visit the website and fill out their loan application form. The form typically requires basic information about your business, such as your business's name, industry, revenue, and desired loan amount. Once you apply, the lender will review it and contact you with further instructions.

How long does getting approved for an SBA loan typically take? 

An SBA loan's approval process can be lengthier than other financing options. It involves several stages, including submitting an application, providing supporting documents, and undergoing a thorough evaluation by the lender and the SBA. On average, it can take several weeks to a few months to receive a final decision on your loan application. It's essential to be prepared for the time commitment involved and promptly provide all the requested information to expedite the process.

Are SBA loans only available to certain types of businesses? 

SBA loans are available to various businesses, including small businesses, startups, and even certain nonprofits. However, businesses must meet specific eligibility requirements to qualify for an SBA loan. These requirements include being a for-profit entity, operating within the United States, meeting the SBA's size standards for your industry, having a sound business purpose, and demonstrating the ability to repay the loan. It's recommended to consult with an SBA-approved lender to determine if your business meets the necessary criteria.