Small business funding
When starting a new business, it is very important to find a great idea – but also you will need funds. There are questions to answer before you search for loans and like which loans suits you the best, how much money I need, how long will it take me to pay it back. Then the next step is to decide what is the best lender for your business.
Small business administration loans (SBA)
SBA loans are guaranteed by the federal agency, which allows lenders to offer them with flexible terms and low interest rates. Also known as, 7(a) loans are the agency’s most popular type of financing. But it is not easy to qualify to get a loan from the SBA. Applying for the SBA is a lengthy process. For some small business owners, especially startups, it might not be worth the time.
Conventional bank loans
Traditional business loans are provided by banks and lenders. This is the most common form of debt financing used by small and medium-sized enterprises. These loans are not guaranteed anything except personal property owner and property purchased by the company. Banks will charge a higher interest rate on the credit and outstanding debt of the owners. Rates are different depending on the credit score of the borrower, length of term, quality of collateral, and the risk of the business.
Is one who provides loans, lines of credit, or cash advances to small businesses, outside of the traditional forms of credit offered by a bank, credit union, or the SBA. Alternative lending is for you if you are looking for a way to grow your small business, but you also face limited or unsecured collateral, bad credit situation, or minimum profitability. The process is quick and flexible and there is no obligation to get started, and no need for collateral or a down payment.
A business line of credit (LOC)
A business line of credit is a revolving line that you can draw against as you need it. Once a credit line is established, drawing funds from it is usually the fastest way for your business to access capital for quick payments or unexpected events. The amount of interest, size of payments and other rules are set by the lender. There are two types of LOC. Most are unsecured (the borrower does not promise the lender any collateral to back the LOC) which are opposite of secured.
Business credit score
Is a numeric representation of your company’s creditworthiness. The information on your business credit report is used to produce the score, and business lenders use it when they are considering your credit application to predict how likely you are to pay them back in a timely fashion. A higher score means your business has a history of paying bills on time. Anyone can have access to your business score. It is important to know that a business credit score is different from personal credit score (FICO).
Your business credit score is an important factor for every Company. It is a dollar-weighted indicator intended to reflect the past payment performance of a business. The score goes from 1 to 100 where a higher number means that there is a higher likelihood that the company will pay its debts. The company can check its Paydex score by buying a business credit report. Dun & Bradstreet measures a company’s risk using a Paydex score and most credit institutions for small businesses rely on Dun & Bradstreet Paydex results to decide whether or not to approve the loan request. Your Paydex result is based on how quickly your company pays its bills and collects a lot of extra information outside payment information.