By James Chittenden
In generations past, getting a business loan was a painful experience if the bank didn’t know or trust you. If you were old enough to be in business before the mid-1990s, you may recall how formal the process was. You had to make an appointment with a loan officer, gather your financial statements and tax returns, drive to the bank, and answer the loan officer’s questions. If the bank declined you, you drove to another bank and applied there.
Don’t overthink it. These platforms are simple.
You can now apply for a business loan without going to the bank, from where you are, from leading online platforms. You may be able to get a loan from Fundera with at least one year in business and revenue. If you have not been in business that long, other personal-based loans are available from LendingTree.
Get a business loan using Fundera
Alternative Lending
If you have at least one year in business but less than two, with sales, then you may get funding via alternative lending. Alternative lending comes from a source other than a bank. It may be an investor lending in a peer-to-peer transaction. Peer-to-peer lending is a borrower obtaining funds from an individual investor, with no bank involvement. The application is completed on an online platform. See your options here.
SBA Loans
The U.S. Small Business Administration (SBA) guarantees loans to small businesses. Apply at a bank or at Fundera. The SBA 7(a) program gives a borrower flexibility in how the proceeds are used, and the maximum amount is $5 million. They feature an SBA guarantee of 85% on principle of $150000 or less, and a 75% guarantee on loans greater than $150000. While 7(a) is a very commonly used program, the SBA has other loans as well.
If you do not qualify for a business loan, consider a personal loan.
Get a personal loan from LendingTree
Home equity loans
You are correct to be cautious about pledging your home as collateral for a small business loan. After all, if you refinance or obtain a home equity line of credit (commonly known as a HELOC), you are taking a mortgage on your home. In the event of default, the property is at risk of foreclosure.
That’s a bit of a test, isn’t it? The thought of betting your home on a business just prompted you to evaluate your confidence in your business plan.
There are a few moving parts to a mortgage, but standard guidelines require 80 percent loan to value (LTV). This means that for every $100,000 of appraised property value, the bank will lend $80,000.
HELOC interest is no longer tax deductible unless the proceeds of the loan are used to improve a home. However, you can use funds from a refinanced mortgage in which cash is taken out without similar restrictions. Tax treatment for HELOCs and second mortgages changed after tax reform passed in 2017. Shop here .
Credit cards and personal loans
Be careful with building a business on credit cards. The rates could be higher than other forms of loans. That, and a personal guarantee is usually required. Therefore, a default on a business credit card subject the owner personally to collection efforts, and will impact the owner’s personal credit.
Occasionally, they are a great way to grow a business, if there is no other credit available and the needs of the business are relatively small.
Like with personal and loans, this credit card tool from LendingTree can show you what options are available for you.
And finally…
Welcome to One Click Advisor! We would be remiss if we didn’t give you a brief tour of the site and what it can do for you. The free Business Builder is a consulting session, solving your business plan questions in minutes. Your challenges and opportunities can be sorted into one of three areas.
Marketing, because it brings in the customers. Start or continue that plan here.
Operations, because it keeps your customers. Start or continue that plan here.
Finance, because it is the scoreboard. Change the “score” and explore financing here.