There is a wide range of loans available to small businesses. But they are not accessible to all business types. The key to increasing your chances of getting a business loan lies in understanding how to get around common barriers, and knowing what to expect when you do.
If You Don’t Have Enough Collateral
Today’s banking landscape is cautious, with few banks wanting to take on a lot of risk. They do this in order to protect themselves in case clients cannot repay their loans. However, there is a way to get the money you need. You can choose lenders that don’t require collateral. Short-term lenders don’t require you to own real estate or equipment. Instead, they will base their decision on the cash flow of your business.
However, what they will do is place a lien on your business assets, so it’s important to be prepared for this.
If your Credit Score is Low
Although you may think that a low credit score spells doom for your business, there is great news; you can still get the money you require by applying for a loan with organisations that don’t place credit score at the top of their list. These companies are easily found by searching; many short-term lenders lend specifically to those businesses having lower scores.
Even better news is that you may be able to get money without having your score checked at all; some companies place their focus on other criteria besides credit score.
If you are a Start-up Company
Doubtless you are familiar with the difficulties of trying to raise capital as a start-up company. And as a start-up, you are unlikely to qualify for a bank loan. But going another route, such as borrowing from a non-profit organisation that specialises in loaning money to new businesses can get you some of the cash you seek.
Whilst going this route may not get you all of the money you need, you may be able to access more than one of these companies. Alternatively, you may be able to access a cash advance for merchants, which lends based on your cash flow. Find out more about getting your business funded here: How To Get Your Business Funded
If Your Business Type is Ineligible
There are several types of business that may be ineligible for bank or government loans. These can include some franchises, companies in the life insurance industry and some health businesses. What’s worse, you may have all the required elements in place to get a government loan, such as having a good credit score, business experience and sufficient collateral.
But there’s no need to fret, because liberal lenders do exist. Some will lend you money based on the legality of your business and the fact that you invoice customers in GBP rather than a foreign currency.
You Want a Loan without having to guarantee it personally
Some lenders require borrowers to personally guarantee their loans, meaning that the individual, and not the business, will be responsible for repayment. In personally guaranteeing the loan, you are promising to pay it back, even if your business isn’t doing well or has to close. If you can’t repay the loan, your personal guarantee means the bank can sell off any personal assets such as a vehicle to satisfy the outstanding balance.
Whilst many loans do require your personal guarantee in order to grant them, there are lenders who do not require you to do so. However, you may have to settle for a lesser loan amount and a possibly higher rate.
Today’s several options for loans mean that business of every size can access the cash they need, whether they are a start-up or seasoned owner.