How to Get Funding for Your Small Business Beyond Banks

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When you’ve got a good business credit score, it’s easy to get small business funding through a traditional bank. However, this process can be more difficult for those with poor credit or new businesses. In addition to banks, some options, such as alternative lenders like First Down Funding, can help you secure funding for your small business.

Small Business Funding Lender Options

You can receive funding for your small business from any of the following lenders:

Traditional Banks

A bank seems like the most obvious choice for small business owners looking for funding. Banks usually require a loan proposal, which details how much you need to borrow and how the money will be used. Banks will also expect you to have a good credit score and provide several supporting documents related to your business. These documents might include information such as:

  • Nature of the business
  • Annual net and gross sales
  • Date of establishment
  • Number of employees
  • Business address
  • Business tax ID

Additionally, banks may ask to see personal credentials from the borrower and any designated founder of the company. However, not all small businesses have enough information about their revenue figures, especially if they’ve been in business for less than two years. Banks are also wary about giving loans to borrowers with poor credit scores, even if the business itself seems legitimate. Most commercial bank loans have high interest rates, according to the Federal Reserve. Some banks also require collateral, which every small business can’t provide.

Investors

Alternatively, small business owners can seek out venture capitalists for funding. These corporations request to have some ownership of a small business and provide capital in exchange. You aren’t obligated to pay the venture capitalist back, though it’s recommended that you at least work out a partial repayment plan. Venture capitalists typically don’t require interest on the loan or collateral. 

Angel investors are individuals that provide small businesses with a hefty lump sum without expecting anything in return. Often, they do this because they genuinely see potential in the small business and want to see it thrive. Better still, they are usually industry professionals that can provide guidance on how to attract clientele. However, angel investors can sometimes be challenging to find.

SBA Loans

The U.S. Small Business Administration does not lend money directly to small business owners. However, it works closely with banks or other lenders to verify the trustworthiness of your business. While this can help you get a loan with fewer criteria, the downside is that you can’t use the funding however you’d like. Additionally, the SBA has strict requirements about the nature of your business, and you might wait over a month for approval.

Alternative Lending

Online lenders like First Down Funding can provide an alternative to get the funding you need for your small business. Since they are not banks, they can be more flexible with their terms and requirements and work with you as a business owner to provide you a solution that works for your business’s financial needs. Because of this, alternative lenders have higher approval rates and a relatively shorter payout time. These lenders usually work with you based on your business’s reputation and projected profits, not credit score and current figures. Unlike most banks, alternative lenders also provide customized approvals depending on the industry of your business. They will find the best loan to simultaneously provide working capital in the present and ensure success in the future.

Lending Marketplace

This is an online marketplace where borrowers can make a profile that can be matched to lenders or investors. Lenders can see all of a company’s records, making them more likely to start a transaction. Once a small business is matched with a lender, payments are fixed to lock in the best rates. However, this service is only available to borrowers in certain states, and it’s a short-term loan capped at $500,000.

Small Business Funding Types

Some of the top business loans for small business owners include:

Startup Loan

This is an ideal loan for a business that has no prior sales history or working capital. A startup loan provides:

  • $500-$750,000
  • Loan terms up to 25 years
  • Multiple loan type options with flexible payments
  • Money available in a few weeks

However, because there’s no prior business history, the owner must have a minimum credit score of 680 and provide collateral. 

Business Line of Credit

A business line of credit is a revolving sum of money free to use at the business owner’s discretion. It can provide up to $500,000 of available capital in as little as a week. To qualify for this loan, you need:

  • A credit score of 560 or higher
  • At least $50,000 in annual revenue
  • More than six months of business sales history

Merchant Cash Advance

A merchant cash advance (MCA) allows business owners to borrow money before future invoices have been paid or products have been purchased. This way, they can work towards paying employees and utilities while the business gets its feet off the ground. Approval and payout times are generally quick but expect a higher interest rate.

Business Term Loan

One of the most popular kinds of small business loans offers capital funding that can be repaid over some time. The funds can be available in a couple of days after approval, and interest rates tend to be lower. Depending on your repayment terms, you may be looking into a short-term loan or long-term loan.

Commercial Mortgage

This kind of loan allows business owners to secure a physical location for their company with low interest rates and short repayment terms. However, the application process is more lengthy because the lender will require documents about the future or existing property itself.

Equipment Financing

Equipment financing gives business owners funds to purchase all types of equipment to support daily operations. This could include heavy lifting tools, computers and supporting software, or even new air conditioning units. The money is available in as little as one day, and borrowers often don’t need high credit scores for approval.

Accounts Receivable Financing

This loan is designed to protect business owners from going into the negative when unpaid invoices pile up. It provides up to 80% of the funds owed at low-interest rates. Even better, most lenders will approve this loan regardless of the owner’s credit score. Instead, they examine the credit scores of the companies or individuals that have outstanding invoices.

Secure Funding for Your Small Business

Requirements for a small business loan can vary drastically between lenders depending on the nature of the loan. However, alternative lenders like First Down Funding typically have the easiest requirements to meet:

  1. Personal Credit Score: The average score for a business term loan approval rests at 600, but it’s possible to be approved with a lower score.
  2. Years in Business: At least one year of business operations is required for approval.
  3. Annual Revenue: Your business should ideally make at least $100,000 each year.

How to Get Funding For Your Small Business with First Down Funding

Unlike many traditional banks, First Down Funding can help you through the process of getting approved for a small business loan. Only a few pieces of documentation are needed to fill out an application, which only takes around 15 minutes. Once approved, you will get your much-needed capital in as little as 48 hours.

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