The pandemic proved a problematic trial for many small businesses across the country. And now, as we slowly recover, small businesses are again facing almost impossible hurdles in some circumstances. Inflation, supply chain issues, and labor issues are all crippling businesses that were once far healthier than they are today.
According to a survey released by the Federal Reserve, small businesses have reported (85% or more) that financial difficulties are hampering their operations. As a result, many companies turn to small business loans to help them see this difficult period.
The problem, however, is small business loans can be hard to come by. Traditional banks tend to favor giant corporations. They are wary of lending to newer and smaller organizations. It is just too much of a risk for them right now. If you manage to work with a conventional bank or lending institution, the process can drag on; it can be seemingly endless.
Recent statistics show that only about 30% of businesses that applied for financing in 2021 received the funds they used. Lending by big banks demonstrated the most notable decline–down almost 30% over the year. That’s the good news here. Online and alternative lenders are picking up the slack where bigger banks fail to deliver. There are, of course, other options available.
Some entrepreneurs also find that they have to rely upon credit cards to get the money needed for their companies. Others are turning to family and friends for money. Still, others are looking into crowdfunding options. So what can you, as a small business owner, do right now to get the cash you need to keep your business afloat? Keep reading to find out more.
Small Business Loans from Online Lenders
It’s no wonder more, and more companies are turning to online lenders to get the proceeds they need. The process with an online or an alternative lender is much different than you will encounter when dealing with the bank. Rather than base your application upon one number, such as a credit score, an online lender will take a more holistic approach to finance. That is to say. They look at the entire picture. They try to understand your story and figure out what value you bring to your community and your industry.
Some fast facts about online lending:
- Online lenders tend to have around a 70% approval rate. Higher than any other type of lending entity.
- With merchant cash advances, approval rates jump to over 85%.
- By the end of 2022, the transaction value of alternative lending loans is projected to reach almost $350 billion.
It’s easy to see why so many small business owners are attracted to online and alternative lenders. Why go through the hassle of dealing with a bank when non-bank alternatives are faster and easier to procure.
How to Get Small Business Loans
So what can you start doing to put yourself in the best position to qualify for a small business loan from an online or alternative lender?
1. Check your credit report and make sure everything is in order. That is to say. You want to look for any errors or inaccuracies. You also want to check for open accounts that you may not use anymore. Go ahead and close those accounts. If you have higher interest rate debts that you are still paying off, make an effort to try and pay those down. The less liability that you have, the better your odds for approval.
2. Do your research into online lenders. There will be some critical differences between the various lenders out there. Starting with a basic search is an excellent way to proceed. Look at the different loan programs that they offer. Consider which may work the best for you and closely examine the terms associated with each loan program. Don’t be afraid to contact the lender directly and ask any questions that you may have. You want to do your homework here.
3. Make sure that your files and documentation are ready to go. The more organized you are, the faster the process will be. The documents and information you want to have ready are tax returns, financial statements to include balance sheets, profit, loss statements, cash flow statements, articles of incorporation if applicable, any business leases you may have, and a business plan. Having a business plan prepared only serves to underline the credibility and integrity of your business endeavor.
4. If you’re purchasing equipment, have the details on the equipment purchased. In an equipment loan situation, the lender will ask to see all of the facts and specs on the equipment in question. Gather as much information as you can from the seller of the equipment.
5. Have a plan for the loan funds. Once you receive the money from the lender, you want to put that money to work for you. In other words, how can you maximize your loan dollars and thus help keep your company moving forward during this challenging financial time?
First Union Lending is Here for You
We work with small businesses all across the country. Our job is to help you thrive and ultimately grow. We offer short-term loans, equipment financing, and SBA loans, among other funding types. Even for those whose credit score may not precisely be ideal, we might still have a solution for you. Call today, and let’s get started.