The first thing that comes to mind is how to get or arrange a loan, right? It seems obvious and difficult. If you need a loan, you go to a bank, because they offer better rates and surely you already have an account open in one of them. Although banks offer the lowest interest and you can pay for a longer period of time, you should consider these problems that many small business owners encounter when they turn to a bank:
• Large banks are not comfortable lending to companies with less than $ 1 million in sales because of the relatively small size of the loan and the greater chance that it will not be repaid compared to larger companies. Because banks don't have the technology of alternative lenders like Camino Financial, it costs them the same to approve a loan of $ 700,000 as one of $ 7,000.
• Small companies do not always have large assets such as real estate or a fleet of vehicles that they can present as collateral. They are more likely to rent these kinds of things rather than own them. Due to the lack of collateral, it is more difficult for small businesses to access a secured loan from a bank.
• When they've been running a business for 3 years, small business owners may not yet have perfect credit scores because they may have maximized their credit cards to start their businesses. Does it sound familiar to you? When you apply for best a loan with a bank, you need to make sure that your credit score is greater than 680 in order to qualify.
Characteristics to Obtain Loans for Flourish Business:
The type of financing that we can access as an SME will depend on different factors of our business. Generally these are the parameters that lenders will look at:
Seniority: young SMEs and those with more than 12 or 24 months will be able to access different types of loans. The security of age stability is an important point for lenders.
Annual Billing: how much we earn from our business will be another important point for us to define how much money to request.
Purpose of Financing: as we have seen, it is not the same to request financing to have working capital than to invest and grow our company.
Business Sector: the sector to which we dedicate ourselves will be vital for entities to decide whether to lend us money or not. Working in the construction sector in 2003 is not the same as in 2009, for example.
Business Plan: Although we are no longer a new company, having our business plan updated is a seal of trust for any lender.
Growth Projection: the economic moment in which we find ourselves, the business plan and the sector where we work will give an idea of the growth that our company may have and will be an important factor in financing us.
Endorsements or Guarantees: having the help of SGR or physical guarantees that assure lenders that we will be able to return the loan money will help us have a wider range of choice.The analysis of these parameters will allow lenders to decide the financing conditions that each type of company can access.
Alternative Ways of financing
Crowdfunding
It is a financing system by which resources are obtained in a massive way through the Internet. In recent years it has become a way to finance itself, which is why many startups have opted for this system to launch their projects.The best-known crowd funding platform that is often used is Verkami, which already exceeds 4,400 projects carried out since 2010.Do not forget to consult the general conditions of use and contracting, since if, at the end of the term to obtain financing, 100% of the objective has not been collected, in this case there will be no type of monetary transaction and contribution commitments of the patrons are canceled.
Crowd Lending
It is one of the most innovative options at the moment in alternative financing and to which most solvent companies resort as a source of complementary financing. As an alternative to banks it is a model that is presented and is increasingly used by SMEs that do not have physical capital.The process is carried out through online platforms that connect companies seeking financing, and interested investors. It is a fast way, since it eliminates intermediaries and thus reduces the associated costs.Some of the crowdlending platforms that operate in Spain are: MyTripleA , ECrowd , LoanBook , Arboribus , Excelend and Grow.ly.
P2P Loans
P2P loans are a novel way to get financing. As we already mentioned in the article on How to get financing for your company without going through the bank , they are usually carried out through platforms that put lenders in contact with people who need money