The credit crunch has forced commercial banks to tighten lending policy across the board. Small business owners looking for the capital to expand need to be creative when conducting a search. SBA-backed 7(a) and 504 guaranteed business loan, as well as other means of credit, are ready and waiting from a number of different sources.
The Savvy Business Owner
Let’s say you are an entrepreneur looking for the money to expand. Big banks, who before the recent credit dry-up were more than willing to open their doors to you, have not only increased the criteria for their loans but also stepped-up the terms. So what are your other options? This decision by the banks opens up the opportunity to lend to smaller institutions. Some of these alternatives are regionally-based, while others are from companies just as large as the banks (but instead of restricting credit, they have initiatives aimed at small businesses.) Without further ado, here are 5 options that don’t involve the commercial banks.
Regional Credit Unions
Banks are not the only lenders doling out loans backed by the Small Business Association (SBA). The SBA is not a lender. Instead, the organization secures a portion of the loan (up to 90% in some instances) allowing the bank to decrease the risk of lending. The SBA wants to see that the business is viable and well-run (which translates to lots of document sharing). Regionally-affiliated credit unions are often smaller than banks and therefore have the ability to be more lenient when it comes to lending policy. They offer the exact same 7(a) and 504 packages as larger institutions.
Microbank Intermediaries business loan
For those early in the stages of developing their business, the SBA also offers a Microloan program. Up to $35,000 is available for either the start-up or non-profit, with the business loan originating through an intermediary lender. For a list of SBA-affiliated microlenders in your area, visit their website.
SBA-Certified Nonbank Lenders
These organizations usually focus on a specific industry or area, however they maintain a special status from the SBA restricting any federal or state regulation. Thanks to this flexibility, they can be much more lenient when doling out loans. Like regional credit unions, they can offer the same loan packages as traditional lenders without the harsh terms.
American Express business loan
Unlike traditional credit cards from AmEx, this one is intended for small and growing businesses. Flexible payment options and a relatively low interest rate are just a few of its perks. OPEN, the American Express small business network, helps to connect entrepreneurs with one another through a community forum as well as provides automatic discounts with partnered companies. The Plum Card is ideal for materials purchasing, as it has no pre-set spending limit and negotiable trade terms on purchases.
A rapidly-growing form of financing is developing over the internet with the advent of peer-to-peer lending. Websites such as Prosper can offer loans with low interest rates in the 7-8% range. It works exactly as it sounds: One person lends to the other. This service allows any person to essentially act as banker, and has rapidly grown to over 1 million members doling out $210,000,000 in loans.