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Top 5 Funding Options for Businesses this 2021

If your business is open and still generating income, obtaining working capital could be extremely beneficial, either for the recovery or the growth of your business. This 2021 is an ideal time to create new sources of sustainable income that generate additional cash flow during unpredictable economic cycles.

Here's a simple guide to help you better understand when it comes to choosing the best option for you and the financial needs of your business.

1. Loans guaranteed by the Federal Small Business Agency

Another option to consider are the many programs provided by the Federal Small Business Agency (SBA). SBA loans are obtained through a bank and are guaranteed by the Federal Small Business Agency.

To obtain this type of financing, you must first find a lender that offers SBA loans (not all banks do) and then choose the most appropriate program, based on its terms and potential uses of funds. If you're not sure where to start, the SBA compiles a list of its most loyal lenders within the 7 (a) loan program (the most popular and versatile SBA loan program, as it can be used for almost any business purpose. ). These lenders will have the most experience with SBA loans, the application, and the process and will therefore be your top options for obtaining an SBA loan for your business.

The Advantages: SBA loans are guaranteed by the government and therefore offer longer repayment terms and lower interest rates. Its Average Percentage Rate (APR) ranges from 5.50% to 8%. And they typically offer larger amounts, from $ 30,000 to $ 5 million.

The Disadvantages: If you are looking to quickly resolve your business financing needs, you may want to look elsewhere. The SBA loan application process is time consuming. The requirements are very strict, only those with good personal credit (usually 690 or more), strong business finances and the flexibility to wait for financing should apply. Even if you qualify, funds may arrive too late - SBA loans can take a long time to secure.

2. Short and medium term loans

Short- and medium-term loans are another type of traditional financing product. Short-term loans typically have terms of less than one year and in some cases terms of up to 18 months. A medium-term loan generally refers to a loan with terms longer than one year.

The Advantages : For quick access to capital, short-term loans are often one of the best options. They are typically available through alternative online lenders, as their application processes are simpler and require minimal requirements. Eligibility varies by bank, your location, and available loan programs, but in general, you may be able to get a short-term loan if your business has been open for more than a year, you have a personal credit score of more than 550 and generates $ 50,000 or more in annual income.

The downsides: Short-term loans are likely to be more expensive. Also, most banks that offer these types of loans will want some type of collateral, usually enough to cover the entire loan. The collateral may include real estate, inventory, cash, or equipment, and will be valued according to what the bank expects to be able to get for the collateral in a sale, not the actual value of the collateral. The qualifications for a medium-term loan are also usually strict - you'll need at least a year in business, a credit score of over 600, and around $ 100,000 or more in annual income.

3. Bank loans

Banks are the largest commercial lending institutions and probably the first place you think of when you get a small business loan. If you have excellent credit and your business has been open for at least a year, you can apply for a loan through your bank or credit union. But even with a perfect credit history, your loan needs may not be great enough for a bank to bother.

The Advantages: Conventional bank loans have low interest rates, and because a federal agency is not involved, the approval process can be faster than obtaining an SBA loan.

The Disadvantages: Traditional small business funders won't get you very far in your application process without a perfect credit rating. Bank loans generally ask for scores above 700. Banks will also want to dig into your income reports, time in business, cash flow statements, financial documents, and that you have a solid business plan. In general, it is difficult to get approved for a conventional bank loan, so not all small businesses can qualify for this option.

4. Credit lines

A line of credit is a contract by which the financial institution makes a certain amount of money available to the user for a specified period. During that period, the individual can use part or all of the credit line. Thus, at the end of the month, the debtor will have a period, for example, two weeks, to return what was consumed plus interest. Interest will only be charged for the used portion of the credit line.

A line of credit provides your business with a cash cushion, as you have pre-approved access to a specific amount of money that you can draw from as needed. There are two types of credit lines: fixed and renewable. If you get a fixed loan, you have limited access to a certain amount of funds. With a revolving line of credit, you pay off your balance and the amount is restored.

The Advantages: Lines of credit offer a lot of flexibility, since they are not structured loans with fixed payments, but only last a certain period of time.

The Disadvantages: This option is not the best if you need long-term financing for a large project. Since it will prevent you from obtaining more funds if you do not pay the credit line before its expiration date. Plus, qualifying for a small business line of credit can be challenging. You will need to show that your business has been open for at least two years and show that it is making a profit. Going into detail, to qualify you will need an impeccable credit history or in other cases, collateral that is worth at least as much as the loan you hope to obtain.

But, if like many small business owners, you don't qualify for a line of credit, don't worry, there are still several options.

5. Alternative financing: quick access to funds, flexible approvals

If all the options we have mentioned seem impersonal or are out of reach, then why not opt ​​for other alternative financing options? Far from being products, alternative financing options function as strategies specifically designed to understand and meet your entrepreneurial and small business needs.

Amerishop Financial financing programs are meaningful and substantial connections with funders who believe that small and medium-sized businesses can also be successful. We understand the potential that small business owners have and the big difference that working capital can make when it comes to reaching our goals this year. In fact, our company was also founded by a group of entrepreneurs and our purpose is to continue expanding the entrepreneurial spirit, and we have succeeded, over the years, we have worked hard to generate trust and transparency among hundreds of clients.

If you need help understanding your financing options, you can turn to the financing experts at Amerishop Financial Services & Advisors. We work with a network of funding sources and experts who will always side with small businesses, guide you through the funding process, and explain your options. If your business has been open for more than three months and is generating income of $ 5,000 or more, you can also be part of this network of thriving business owners. ¡Get Your Pre-qualification!

Call us to be pleased to assist you: 1 (877) 407.9195

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