Loan Alternatives for Small Businesses

It is hard for most small businesses to qualify for the traditional small business loans offered by most banks. Most banks have tightened their lending standards especially after the 2009 economic recession and many small businesses are disqualified from getting loans from local banks because of bad credit ratings. Most small businesses are found in small local towns where locally –owned banks rarely provide any financial support. Small businesses still need financial assistance to expand and grow into bigger businesses. There are many financial alternatives for small businesses that can help to survive these hard economic times as will be discussed below.  Some even use fixed rate credit card solutions!

Equity financing
Small businesses can benefit from equity financing which involves institutional or private investors providing the necessary financing in exchange for a percentage of equity ownership stake in the business. There are many professional investors also referred to as venture capitalists who are willing to finance small businesses that have great potential of making profits and succeeding. They invest this money and in exchange claim some ownership in the business. There are many people who can provide equity funding ranging from individual investors or financial institutions. If you do use equity in the form of a credit card, be sure to use a credit card comparison site.

Small businesses can get financing from local grants that are available in most towns. Although grants are very rare and there is no sufficient information on how they can be accessed, small businesses can carry out a comprehensive research and find out which ones are beneficial to the business. Granting agencies include chambers of commerce, economic development groups and other state level grants firms. There are also many grant opportunities available online, such as the Small Business Administrations Small Business Innovation Research (SBIR) Program that targets businesses in the technology sector. There are also various government agencies that provide funding to small businesses with an aim of spurring economic growth and providing employment opportunities. Government grants mainly target small innovative businesses that have a potential to grow in the future. Small businesses are expected to fill a form and present a business proposal when applying for grants.

Credit unions
Credit unions are financial institutions that are owned and managed by members. They are similar to banks and have credit cards, debit cards and an online presence just like traditional banks. The only difference is that they lend money to the members only at a lower interest rate and have a flexible payment schedule. Small businesses owners will be required to join these credit unions if they want to access loans. Most credit unions target small businesses and are an ideal option for seeking financing. However, credit unions are usually restricted by government regulations and usually give smaller loans compared to banks.

Friend and family
Small business owners can ask for a loan from rich relatives or friends to boost the business. This is usually an ideal option for small amounts of money ranging from $10,000 to $50,000. Most of these loans do not come with legal expenses and are usually based on mutual trust that the small business owner will pay back the loan as per the verbal terms agreed.

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