In the past, getting business capital loans was a major chore. In fact, not too long ago, obtaining a traditional business loan would have required a lengthy process involving submitting business plans and financial statements to several different lenders. If you were lucky enough to secure a traditional business loan, your lender probably performed a thorough credit review which included a credit assessment of your company’s ability to repay the loan. If you didn’t, then it was likely that you would have been rejected for an unsecured commercial loan, which is the one most often defaulted on by small businesses.
Fortunately, today there are several alternative business capital loans available to small businesses. Online lenders such as AdvancePoint Capital have provided an easy solution to the complex financial problem. At AdvancePoint Capital, we work with a number of different lenders to find you access to your working capital you require. With a standard small business loan, we will review your business operation and credit rating before providing you with a quote for a potential commercial loan. This helps you make sure you can get back in business quickly.
Another alternative from online lenders is to work with private lending institutions Business capital loans. Private commercial lending institutions such as angel investors and venture capital firms typically provide short-term unsecured business loans for working capital loans. Because these lenders usually have a higher level of capital requirement for working capital loans, you may need to provide a higher riskier business plan along with a good credit rating for access to their funding.
Most online lenders for working capital loans are looking for business capital loans with higher interest rates and longer terms. In fact, if you look around, it’s quite common for online funding to be considerably more aggressive in its rate structures than institutional lenders. However, most business owners don’t look for a long term solution when seeking small business capital loans. Instead, most owners look for immediate funding. This means they seek term loans that will be available for a period of one year to three years.
If your business is not expected to generate a significant profit, it may not make sense to repay your small business capital loans early. The reason for this is that the lender is assuming a certain amount of risk by issuing a loan with a term length of one or more years. The longer repayment period you agree to, the more opportunity the lender has to recover its investment. As such, if you are able to repay your outstanding balance earlier than expected, you’ll not only avoid paying penalty fees but also keep more of your money for yourself.
To find small businesses that are successful enough to obtain working capital loans at competitive rates, it’s critical to carefully review each potential borrower’s credit history and operational history. Typically, working capital loans are based upon the owner’s credit history, which can make it difficult to obtain. In addition to that, working capital loans are generally based on a monthly cash flow. The operational history of small businesses may include a mix of cash flow from day-to-day operations and revenue generated through various sources. Because these companies have little operational overhead, they are more attractive to traditional loan providers. Traditional loan providers are typically willing to approve small businesses that have reasonable chances of generating profits.
Small business capital loan providers typically offer small businesses a variety of options. Depending upon your specific circumstances, a capital loan provider may require you to clarify, which means you’ll need to provide your personal guarantee to secure the loan. If you clarify, you’ll receive a lower interest rate because the lender assumes more risk. A capified business may also be eligible for a type of lines of credit, referred to as an unsecured small business capital loan, that carries significantly higher interest than traditional unsecured business loans.
Business loans for working capital are available from local commercial lenders, national commercial lenders and online financial institutions. Before you decide on a small business capital loan, be sure to compare interest rates, payback terms and other costs associated with the financing. Your best option is likely to be an online lender because most online financial institutions have lower interest rates. While there are some fees associated with online lending, the costs are minimal and typically well worth the savings.