Options, Options, Options
We mentioned that there are multiple avenues to secure a loan. Here are three of the most common, and a summary of what makes them different.
Traditional banks are still a great place to get a loan, under certain conditions. You should consider using a bank if your business has a strong history of profitability, you have potential collateral, you have generally good credit, and you don’t need the cash too quickly. The application process is generally much slower, as the bank will more thoroughly investigate the viability of you and your business before cutting a check. On the other hand, banks might offer more favorable terms than online lenders.
There are a whole host of online lenders you can apply with. They offer everything from small, $1,000 loans up to multi-million dollar lines of credit. No matter how big or small your business is, there’s probably an online lender that suits your needs.
You should investigate using an online lender if your business is still relatively new, you don’t have much (or any) collateral, or you need the money quickly. You’ll probably pay a higher interest rate than with traditional banks, but your business won’t be scrutinized quite as hard in the application process either. They have higher approval rates and the funding can arrive in less than 24 hours, in some cases.
If your company is too small (or too new) to qualify for a loan from the banks or other online lenders, consider microlending. They are non-profits who specialize in short-term loans of less than $50,000. While you won’t find super attractive interest rates or APRs. However, if you’ve stuck out with other lenders, microlenders are worth a shot.
Some popular examples of microlenders are Accion, Kiva, the Opportunity Fund and the Business Center for New Americans. If you have a smaller company, no operating history, no collateral, or poor personal credit, you might need to settle for microlending.