Banks aren’t the only ones lending out money to small businessesIf you already contacted your business banker, you might already be aware of the bank requirements if you want a working capital loan from them. Traditionally banks are looking for businesses that have a history of good credit from the business owners. If the business has multiple owners, and they own more than 20% share of the company, the bank will require those owners to be on the loan. That means, anyone who has 20% or more ownership must have good credit. From the banks that we’ve interviewed, they are looking for business owners who have a least a 680 credit score or greater. Having exceptional credit is not their only requirement, but having healthy tax returns for the past two to three years will also another heavily weighted item the bank will consider. Collateral would be one last huge requirement the banks would like to see. If you have a business with no collateral or collateral the banks won’t accept, what do you do now?
If your business can’t fit in the tiny requirement box the banks have created, then you need to know that there are other options for working capital with more liberal guidelines. Banks might be hard to deal with at times. Did you know there are easier ways to get the financing for your business?
Do you have access to investors? Whether your pool of investors are family, friends or even people whom you don’t have a relationship with, this is another great way to get the financing your business might need. Depending on the investors knowledge on investing with private businesses, they might want to see your books, see your credit profile, and maybe even want to know some of your business practices. So be prepared, just because they are not a bank, they still might want to look at the same items banks look at when reviewing this potential investment. Structuring the deal will be the most difficult. You can offer a flat rate of return based on their investment and the term of their investment. You can even offer stock options which can be a little more complicated.
Merchant funding is an alternative way of obtaining financing for your business. However, this is only available for businesses who are currently accepting credit cards as a form of payment from their customers. This is basically a business cash advance, where your business can sell it’s future credit card sales at a discount. The qualifications are based off the business cash flow with credit card sales. Having lower credit scores from the business owner(s) isn’t typically an issue. First Capital Business Finance offers this program and we can have an approval within 48 hours or less. We charge no upfront fee’s, our approval process is as simple as it gets!
Working capital loan is one last alternative, and this is specifically for businesses who might not accept credit cards as a form of payment. Just like merchant funding, we would look at the cash flow of the business by reviewing your bank statements. Tax returns are not necessary for this program; however having your bank statements will be a requirement. If you have less than perfect credit, you shouldn’t be concerned. Again, we are looking at the deposits of your business and credit isn’t a huge factor. First Capital Business Finance offers this program as well and we can have an approval within 48 hours or less. We charge no upfront fee’s, our approval process is as simple as it gets!
One last thing any business owner should know: If you’re looking for financing you should never have to pay any type of upfront fee. We’ve seen our competitors charging upfront fees, whether that is for underwriting, processing, reviewing your file, you should never pay any type of fee if you’re applying for a loan. We are confident that we offer the most competitive financial products out there, and the majority of our clients will proceed with our financing when the time is right.