The pandemic has slowed business down tenfold. Every industry has seen a drop in revenue and profit, damaging the workforce, production, and logistics. Unfortunately, many small business owners have been struck by this crisis, with some falling into bankruptcy.
Suppose your business is struggling or you're looking for capital to start a new venture despite the pandemic. Here are some loan options you might consider to help you fund or keep your business afloat in the choppy waters of the "new normal".
Personal loans are a go-to option for individuals and are offered by banks and financial institutions. This traditional loan is suitable if your credit score makes you eligible to apply for funding to jumpstart your business or plug a gap.
Bear in mind that the amount you can borrow, and the interest rate payable will vary according to your credit score. So, building a good credit score before applying for credit can put you in a stronger position for approval and give you access to better rates.
Some personal loans require a guarantee - either from another person or in the form of an asset. This collateral can either increase the amount you can borrow or increase your approval rate. Either way, being able to offer a guarantee can quickly turn the odds in your favour.
Remember, access to funding should you need it is essential, especially in a pandemic. Make sure you only ever borrow as much as you need, and you can afford to repay. Non or late payment will adversely affect your credit rating and your ability to access finance in the future.
Term loans are similar to personal loans. The difference is that term loans are usually for larger, longer term business projects.
Taking out a term loan can mean you can borrow a larger sum. This additional capital can be used to buy a sizeable asses (perhaps machinery or business premises), fund a growth strategy that will improve profits or restart a bankrupt business. Just like personal loans, term loans require a good credit rating and possibly collateral that matches the value of the proposed loan.
Non-profit micro lenders
Non-profit micro lenders help business owners and struggling start ups in disadvantaged communities. They typically assist businesses looking for funding in areas of economic deprivation, where there has been a natural disaster or other factors that affect their way of living and ability to get out of poverty.
Micro lenders can be helpful for people who don't need banks or significant term loans to keep their businesses afloat. If you're a small business owner and only need a small amount of seed funding, this is an excellent option. Often, these non-profits offer a range of additional support such as consultation and training that will improve your business skills, marketing campaigns and ability to run a successful business.
Venture capitalists, also known as Angel investors, are experienced business experts who can improve the business and use the current economy to their advantage. These investors assist small business owners in exchange for a portion of your company shares.
These experts will help you by providing funding and paving the way to new clients and contracts through their business connections, experience and understanding of the industry. In exchange, you will have to relinquish a share of your ownership.
The catch with option is that most venture capitalists and angel investors are only willing to help if they see the potential in your business to grow and generate strong profits. As a business owner, you will need a strong concept, growth and profit forecasts before that will even consider working with you.
Online lending is leading alternative to individuals and businesses that are experiencing financial struggles. Websites like Creditninja.com take pride in having high approval rates on loan applications and faster fund transfers than most banks.
If you need a small amount of funding to start your business, a loan from an online lender could be a good option. Most online lenders will offer smaller loan amounts than traditional lenders.
Once you have built a good rating with the online lender, you might be eligible for a bigger loan with a longer repayment periods. You might even be able to customise your loan, the amount you borrow and your preferred repayment dates.
A word of warning: online lenders often do not require a guarantee so the penalties for defaulting on the loan can be far higher.
Getting your business back on track is never easy. It can take time to arrange the funding you need. However, these loan options may enable you to get the funding you need. And with hard work, patience and good financial habits, you can get your business back on its feet and develop a good credit rating.
Copyright 2021. Featured post made possible by Sally Trase of Start Grid/Searchtides for CreditNinja.