If you’re looking to increase your business’s inventory, investing in opening another shop or cover the cost of a future construction project chances are you don’t have the capital to pay for all of these expenses which is why business owners look for alternative forms of funding small business. The only thing left for you to do now is to find the right one for you and one of the most convenient ways is through the web. One issue you have to be aware of however when it comes to finding and applying for funding online is being prepared as many people think that just completing an application online means you’re qualified. The bank application process is not that easy as many business owners get denied because of lack of preparation which is why you must ask if you meet the criteria or done the steps needed to qualify which are listed below.
1.) Give Reasons As To Why You Think You Deserve Funding
Banks and Lenders generally would not give applicants a chance unless there is a good reason behind it and if they could repay it all. Some of the questions you should be asking is whether you have the a steady flow of cash to repay them back or if your business really needs the money. The fact of the matter is you have to explain why you need the money and be as persuasive as you can be when you’re talking to a lender. Keep in mind that some reasons such as starting a business or trying to buy another one are well known reasons that get turned down often. Building credit, hiring new employees or getting the capital necessary to take advantage of a business opportunity are some good reasons you can put down but to better your chances a strong financial summary of your business might convince lenders that you’re good for it.
2.) Meeting The Requirements
Having good credit is a must for business owners and/or their partners to have in their field of business. Lenders are looking for experienced applicants with good financial standings and collateral and if the business is personally invested by you it can enhance your chances of getting funding. The documents needed depends on the lender but typically the three most common ones are bank statements, some business information documents and legal documents. All of which are used to determine how strong is your business, how long you’ve been in business and proof that you are the owner and have all the proper documentation like licenses and permits.
3.) Right Type Of Funding
There are many types of funding you could choose from but you need to be sure you know which one is best for your business. Some of the following are listed below are examples of the different types of financing cited from The Step-by-Step Guide To Getting Business Funding Online by Jared Hecht.
With traditional term funding, you can get cash upfront, and pay it back over a set term (generally 1 to 5 years). These types of funding are given for a specific business purchase, such as equipment.
Short-term funding are similar, but have shorter repayment periods (and higher APRs). Paperwork for short-term funding is limited, and you may get approved even with bad credit.
Yes personal funding can be used for business purposes. Applying for personal funding is a good idea when your company doesn’t have a lengthy financial history.
Business Line of Credit
A business line of credit allows you to borrow money only when you need it. They can be a great solution when cash flow is a problem.
Even if you can’t get traditional funding from an online lender, you aren’t out of luck. Invoice financing allows you to obtain money for invoices before the client pays (a percentage of the bill is usually given to the lender).
Business cash advances
Also called a merchant cash advance, these funds provide you with a lump sum of capital. You repay by giving a portion of your daily credit card sales. The approval process is easier than other business financing options and you don’t need stellar credit. However, fees are some, if not the highest on the market.
4.) Finding The Right Lender
The funding amount varies but typically the lowest they can go for is $2,500 but in some cases regular lending institutions won’t go for giving out low amounts so you are required to make other choices when it comes to finding a lender some of which can range from community banks and credit unions to alternative lenders. Some of these lenders have the benefit of being very helpful to businesses to quick approvals. The Small Business Association usually offer long term funding at low interest rates which though don’t offer fast approvals are still available options that offer diverse funding options geared towards specific industries.
5.) Compare and Pick
With all these funding options that are available that offer basically the same thing you must now compare which one would give you the most benefits with the least expense. One of the things to look for in a business funding contract is the interest rate, annual percentage rate, fees and factor rate but between the four the APR is looked at the most as it includes the interest rate and the terms too. The factor rate are typically found in merchant cash advances and the price you pay back is the principal amount ties the factor rate. On top of all of this there are other expenses you have to pay for too like closing cost and originators fee. It’s usually the best to pick the option with the lowest APR since it holds the most weight.
When it comes to applying for business financing that meets your needs its always best to come prepared and thoroughly research all your available options. The more insight the better as you get to know more about how much you’d be expected to pay which is the biggest concern that comes to mind when choosing what kind of funding options is best for you. If you know how much you need and you meet all the other previous requirements look for the most affordable option and pay on their terms otherwise you could hurt your credit history jeopardizing your chances of getting funding from a alternative finance establishment again. If on the other hand you pay on time and are very responsible and cautious you could establish a good relationship with your lender and build a strong credit rating which is always a good idea.
This article was completely sourced and rewritten from http://www.forbes.com/sites/jaredhecht/2016/10/10/the-step-by-step-guide-to-getting-business-funding-online/#77683e584a06