After the 20 recession, small business financing is still
experiencing its effects - especially those trying to qualify for loans through
big banks. According to a report published by Harvard Business School,
financial institutions are not interested in lending less than 100,000 100,000
(so-called microloans) due to high transaction costs and low-profit margins.
This is a big problem, according to a joint survey of the Federal Reserve Banks
in New York, Atlanta, Cleveland and Philadelphia, more than 50 percent of all
small businesses seeking loans are below the $ 100,000 mark.
Due to the diversity of small businesses, there is no
"one-size-fits-all" debt solution for entrepreneurs. This post will
walk you through three great money options.
1.
Community Banks
According to Lyle Brainerd, a member of the Board of
Governors of the Federal Reserve System, community banks represent 50 percent
of all small business loans and are a major source of microlens. As their name
suggests, these banks are usually near the local community - in contrast to
large regional or national banks (Key, JPMorgan Chase, etc.).
One of the main advantages of using community banks is that
most relationship-based financing is managed. This means that bankers take the
time to determine the quality of your loan application on various factors and
grounds; they establish credit value on your company's finances. In contrast,
most large banks rely on credit scores to process microlenses. For startups and registering new companies that do not have time to establish a long credit history,
they may be disqualified from scratch.
2. Small
Business Credit Cards
One of the best ways to help finance purchases is to use a
small business credit card. Outside of the obvious benefits of providing you
with rolling credit month-to-month, credit cards can also help you build your credit
score and make discounts.
Past loan quality makes up a large part of how your business
score is determined. If you are not often employed to provide financing with
various vendors, your firm has a thin credit profile for you. Because of this,
it is wise to use a business credit card to pay for your expenses over time; this
practice will create your organization's credit score. Whenever possible,
credit card balances should be paid in full with each billing cycle. Also, be
sure to avoid missing payments or being criminal. These national things can
drastically bring your score back and it will take a long time to undo.
Another reason why using small-business credit cards is
worthwhile is the potential discounts they offer. The best business credit card
rewards users for every dollar. It has the potential to earn your account
anywhere from 1 percent to 5 percent of your purchase. Before applying, just
make sure your company considers the most-bought sellers, and then sign up for
a card that offers the highest rewards in these categories.
3. Online
Lending
Online platforms account for only a small percentage of the
small business lending market, though they are also the youngest. Online lending
companies, such as On Deck, lending clubs and providers use obsolete data
sources in their underwriting process. Like community banks, lending online
provides an advantage over the credit score-based approach of large banks,
which obsolesce many young companies.
The disadvantage of lending online is that regulatory
practices are not yet clearly established and difficult to enforce standards.
As a result, if your company is seeking a small business loan from an online
company, you are advised to contact them with additional caution. You must
always make sure that you understand and fully understand the terms of a loan.
Set up a verification process and avoid companies that are not well established
in this area.
A financing
option: Crowdfunding
An alternative to obtaining a small business loan is crowd
funding. This method for businesses that are in the process of developing a new
product or service for Crowdfunding relies on generic donations to build your
product - usually with the promise of some reward at a time.
Crowdfunding has grown in popularity in recent years.
Crestor has raised $ 2 billion across 5 projects across large crowdfunding
companies - on average about $ 22.5 per campaign. Generally, your company needs
to have a good social media presence or campaign to generate enough interest to
achieve your financial goals. Crowdfunding initiatives tend to be product and
technology-based. So, a hiring company like Plumbing or an IT firm will have no
success with this approach.
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