Over 32.5 million small businesses in the United States are vying for success in their chosen field. Unfortunately, about half of small businesses close in the first five years after their grand opening because of a lack of funds. However, seeking bank loans can be challenging for small business owners with not the best credit scores.
Alternative business financing allows small and significant companies to borrow funds without completing the action through your typical financial institution. For example, instead of going to a popular bank for a loan, you can seek funds from an online lender that does not have as many high-interest rates or stringent credit score requirements to receive the financing.
The benefits of online lenders
Use an online lender like AdvancePoint Capital (https://advancepointcap.com/) to find options for small business loans, a business line of credit, or an SBA 7(a) term loan.
Online lending companies are a better alternative financing option because they have lower interest rates. Because these companies do not have the overhead of operating a company building, they pass these savings on to their clients through lower interest rates.
In the event that you have a low personal credit score, you can still qualify for a small business loan or small business line of credit. Let’s highlight the difference between both of them.
The difference between a business loan and a business line of credit
A small business loan usually lasts six to ten years, depending on how much you borrow and your minimum payment. But, of course, you can pay more than the minimum payment to reduce your debt faster only if your sales allow it.
General small business loans range from $10,000 to $500,000. You can utilize the loan for different aspects of your business, such as paying rent or mortgage on your building, purchasing equipment, paying for marketing services, and more.
A business line of credit lasts for as long as you wish to hold the account. Think of the line of credit like a credit card, except it’s specifically for your small business needs. The revolving credit line can be $5,000 to $10,000 at the lowest or up to $250,000. If you are a business just starting out, you may receive a $5,000 to $10,000 line of credit.
Lines of credit for business charges simple interest. Interest charges occur only on what you borrow.
Other alternative financing options
The SBA 7(a) term loans allow for a higher borrowing minimum at $25,000 instead of $10,000 like the original small business loans. You can borrow up to $5 million for larger projects such as renovations or expansions.
You can try other alternative financing options such as:
- Crowdfunding: Set up a campaign to raise funds on a crowdfunding website. The general public contributes a donation to your business for your grand opening, expansion, or renovation.
- Grants: These funds from small business organizations and other entities are free. You do not have to pay them back as you do with loans.
- Angel investing is someone who supports your business finances for you to start it. However, you must promise them some ownership equity in return.
There are many forms of alternative financing out there waiting for you to discover them. Make sure that you research all the available options for your business. And, start your business today!