Finding and obtaining small business funding can seem like a daunting task for you as a small business owner, especially if your business is a startup and you have no experience sourcing capital. It may seem like it’s almost impossible to get the small business funding you need in the current economy. The truth is lenders are still lending, you just need to know how to find them. Keep in mind that there are thousands of bank and non-bank lenders out there so there’s plenty of fish in the sea. That doesn’t mean it’s going to be easy to obtain funding, but landing it may not be as difficult as you may think if you know how to go about the process.
We’ve learned over and over again that when small businesses have access to funding they grow their top-line revenues and they also tend to hire people to support that growth. This is an important concept, one not to be taken lightly. More than a few small business owners have stumbled simply because they did not have a well-thought-out strategic plan for how to get their funding.
Essentially there are 3 keys to finding and obtaining small business funding for your business:
Knowing where to go and who to talk to
Let’s face it, you’re an expert at what you do, but you may not be an expert in small business funding. Most people start with their local bank, and that’s okay. However, if that doesn’t work out then think about some popular startup funding options if your business is in its first few years of operation. If you’re an established company with some solid top line revenues, then you may want to consider options like factoring or an SBA loan.
There are lots of new and innovative lenders out there who are good options to consider if the bank says no. Fundera has a great model. They are like Kayak for small business loans. They are a matchmaker for non-bank small business loans. It’s a really cool twist on the popular consumer website.
Another option is to work with a small business funding expert. These are individuals who have access to a variety of small business funding options. LenCred has access to over 500 business loan brokers seeking prospects in need of fulfillment.
Knowing and understanding the lender’s criteria for approval
Each and every lender will have certain and sometimes different criteria you have to meet in order to get approved. A major factor in getting approved is knowing what the lender expects of you before you approach them. Knowing and understanding their criteria for approval will enable you to be prepared.
For example, if a lender requires a 700 FICO score in order to approve loans then you’ll want to know it. Some good examples of this are lenders like Prosper and Lending Club. If you poke around their websites you’ll get a pretty good idea what kind of credit scores you’ll need as well as some of their underwriting expectations.
If you don’t want to spend lots of time doing that type of research, then keep in mind that you can always find a company or an individual who specializes in helping businesses find funding.
Knowing what type of financing is the most suitable for you
Depending on where you are in business (startup or existing business phase) you may qualify for different types of small business funding. Some small business funding options may or may not be suitable depending upon where you are. The key is to figure out what type of funding is the most suitable for you based on your current situation. For example, if you are a startup small business owner with good credit, you should probably consider business credit card funding. If you’re a startup a business owner with less than perfect credit, you may be able to seek alternative options such as microloans (microloan lenders often service loans to entrepreneurs with credit that is less than perfect). If you’re an existing business owner with revenues coming in, you could qualify for a variety of different options including small business credit cards, SBA loans, purchase order financing, equipment lease financing, merchant cash advances, or accounts receivables financing.
Again, if you strike out on your own and don’t want to take the time to source funding on your own then find an expert who can help play matchmaker for you.
Getting your funding is not easy, but it definitely becomes less painful when you understand your options and create a strategic plan around how to get your funding. Your business, your spouse, and those future employees who are coming to work for you will all thank you if you plan and take a strategic approach toward obtaining funding wisely.