And in a tough economy everyone is looking to hold on to their money as long as possible — this means you may find that your cash flow is never consistent.
Were you without employees, you might be able to manage small cash flow inconveniences. But, you must meet payroll and doing so may mean taking a creative approach, such as tapping a bank line of credit or a small business loan that can keep you on track. Here are some reliable sources for small business loans and business lines of credit.
The best place to turn for a loan is your bank. Your banker knows you, has a running record of your business accounts, and is probably the best source for lending that you have.
But don’t rely on your own bank alone when looking for a small business loan or a line of credit. There are dozens of banks that lend money to small business operators with many having stellar reputations and offering reasonable loan rates.
Contact at least a half dozen small banks in your area and make a pitch for a loan. Likely, you will need to have a business plan in place and you should have impeccable financial records to support your request. Your accountant should be available to go to bat for you and your attorney should review your loan agreement if it is a particularly large one, let’s say, for over $100,000. And don’t forget credit unions either. Some credit unions are eager lenders to local businesses and should be contacted for loan information.
The Small Business Administration
The federal government through its Small Business Administration (SBA) arm helps thousands of businesses secure funding. Generally, the SBA does not lend money directly to small businesses, rather it directs borrowers to banks that offer loans guaranteed by the SBA.
Although the SBA guarantees some business loans, you will still need to receive approval directly from the bank before a loan is extended to you. Cash flow and profit are important to banks, considerations that will be weighed as part of the business loan approval process. If your credit is spotty you may need to clean up your records first before a loan will be granted.
The SBA also operates a microloan program, one that benefits certain non-profit, community-based organizations. Microloans can be used to purchase machinery or equipment, to pay for furniture or fixtures, to purchase inventory or supplies, and even for working capital.
You can raise capital in another way, specifically by reaching out to crowdfunding sources that have that have taken off in recent years. Crowdfunding, also known as equity financing and crowd financing, pools money from many individuals and organizations to fund various initiatives.
Among the popular sites are KickStarter.com, Seedrs, RocketHub, and CrowdFunder, sites that enable entrepreneurs and small businesses to connect with thousands of investors. Each site operates uniquely and there are literally hundreds of sources to choose from. Some target early stage businesses while others also welcome businesses with special projects. Crowdfunding provides a loan, not a line of credit.
Small business operators should have an amount in mind when seeking a loan or a business line of credit. Give consideration to what your business needs are for the short, medium and long term to determine a loan amount that is right for you.
Craig Mathews is the Social Media Coordinator at esmallbusinessloan.com, a company with a loan program that provides an alternative to traditional bank loans, with a fast and easy application process.