Owning a business may be one of the greatest achievements of your life, and the success of that business often relies on your ability to generate the funds needed for daily operating expenses. Managing cash flow becomes all the more complicated when move to a new building, upgrade equipment, or hire new employees.
For a new business, obtaining a loan from a traditional bank is usually not an option. Banks generally turn down any applicant with less than 3 years of operation, leaving young businesses to find funding elsewhere. Banks even turndown established businesses up to 80% of the time. So where do business owners turn for the funding they need for a successful business?
Alternative Loans are a Business Owner’s Saving Grace
When a traditional bank turns down a business for a loan, it leaves the business owner feeling defeated and left with limited options. What are business owners to do? Cutting costs and counting pennies only goes so far, and all of this monitoring and scraping can end up costing more in the long-run. Alternative loans are available to business owners for a variety of funding needs. It is helpful to understand some of the options that you have and to be aware of the steps you can take to obtaining funds when you need them most.
Locate a Trustworthy Broker
Loan brokers can be a tough bunch to deal with. Especially when they are just in the business for the money. How does a business owner determine which loan broker will to turn to when they are in need of funding? With so many options and so many variables, choosing a commercial loan broker to help you can be a daunting task.
Heed the warnings: many commercial loan brokers do not want to help you, but rather they only care about helping themselves. These are the brokers to avoid and telling them apart from the good brokers really isn’t difficult when you know what to look for:
Ask for references – Your alternative loan broker should be able to provide you with references that you can contact to verify the legitimacy of the broker. If the broker won’t provide references, or avoids the request completely, you can probably assume that they are not in this business to help business owners.
Examples of Deals – Alternative loan brokers will be proud of the deals that they are funding. They will want to show you how they were able to save a business from dissolution and get them back on their feet. If you come across a loan broker that will not provide examples of how they helped other companies, they probably aren’t in it for the right reasons.
Experience – Your loan broker didn’t start working in the financial niche overnight. There must be some amount of experience under their belt before they can become a successful broker. Ask them for their resume or question the amount of experience they have and ask for proof. You wouldn’t trust a college freshman to perform brain surgery, you can’t trust an inexperienced broker to get you the loan you need.
Get Your Ducks in a Row
It is helpful when applying for a loan to be prepared for any scenario. Get all of your financial records and bank statements prepared ahead of time. Bring information on collaterals and owned real estate from the very beginning. The more prepared you are, the faster the process will go and you will receive funding more quickly. Your business plan and financials should be top priority when preparing to apply for any type of loan, as a good alternative loan broker will want to get to know your needs and your business before offering you financing.
When your business is in need of funding, your first stop is usually a traditional bank. These loan applications can take weeks or even months to get approval and release funds, and that’s IF you are even approved for them. Alternative loan brokers work with lender networks which include investors and lenders that traditional banks don’t have access to. It is in a business’s best interest to use an alternative lender and skip the bank all together when you need funding. Research the different loan types and decide which ones seem like the best options for your needs. Make a list and bring it to your loan broker when applying for funding. They will help you to choose the right funding, get the lowest rates, and best repayment options for your specific needs.