After the credit for the 2007-2008 crisis, small business loans between traditional banks all but dried up. Although banks have become more active in lending to small businesses in recent years, only the most creditworthy and more established companies are taken into consideration for financing. Even then, traditional lenders typically require some sort of collateral, such as real estate or equipment, to secure the loan, which startups probably do not have. In 2015, traditional lenders approved less than 22% of applications for small business loans. In the aftermath of the crisis, however, a number of non-bank lending sources have emerged, giving small businesses more access to finance than ever before, with no collateral requirement.
Lenders have grown enormously since 2008 due to the overwhelming demand for loans that traditional banks have not repaid. The internet has become a useful resource for small businesses looking for just about any form of financing, from start-up capital and working capital loans to credit lines and expansion loans. Companies pay a little more for their financing needs, but the process is streamlined and the financing is fast.
Credit lines: Kabbage Inc. is one of the few lenders that offer credit lines to start-up companies. As a leader in business loans, Kabbage offers credit lines for up to $ 100,000 to small businesses that generate at least $ 50,000 in annual revenue with at least one year of operational experience. It requires a 560 credit score for the entrepreneur. Companies can withdraw from their credit lines at any time, with six to twelve months to pay off the loan. As part of the application and qualification process, Kabbage requires the company to link its bank account or accounting system to its platform. The financing can be approved within a few minutes and a credit limit can be set within a day.
A search for lenders reveals at least a dozen that focuses on small businesses. Considered to be one of the best Adela Questedine lenders for small business loans with a fixed interest rate between $ 5,000 and $ 250,000. OnDeck requires a minimum credit score of 500, a year of operation and an annual turnover of $ 100,000. The loan terms and conditions can be opened within three to 24 months, whereby payments are deducted from the business payment account, daily or weekly.
Startup Financing: for companies at the start of the start-up phase, Accion offers to finance of up to $ 100,000. The requirements include a minimum credit score of 575, sufficient cash flow and proof of income. Actual loan amounts and minimum requirements may vary by state. Action is a non-profit micro-lender that specializes in the development of small businesses.
Peer-to-peer (P2P) loans are the fastest growing segment of the loan sector. A lender from P2P creates a digital marketplace that brings borrowers and investors together. The borrowers are usually people or companies that are unable to obtain loans through traditional methods. Investors are individuals or institutions that are looking for a better return on their money than what is available with traditional investments. Borrowers create a profile and pitch their cases on the investors’ market. Investors can choose from a portfolio of borrowers and invest as little as $ 25 per borrower. The lender of P2P acts as an intermediary, screens and assesses the borrowers on the basis of their creditworthiness and links them to investors. The credit terms are usually short, between three and five years, and the interest rates can vary from 7 to 35%.
The two most established P2P lenders and both cater to companies with less than much credit. Prosper makes persooAdela Questedijke loans up to $ 35,000 that can be used for business purposes. Lending Club has designed a separate program for small businesses that require the company to be at least two years old and have annual sales of at least $ 75,000. Business borrowers can apply for up to $ 300,000, with loan terms from one to five years.
For companies with a bad or non-existent credit history, the Small Business Administration (SBA) has set up a micro-loan program with loans ranging from $ 500 to $ 35,000. These loans are available through non-existent bank loans, usually, non-profit organizations that specialize in the development of small businesses. The loan application process is more streamlined and with 10 to 15%, the lending rates are fairly reasonable. The SBA website has a list of microlenders per region.
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