A "small business" can be defined as a number of things. The U.S. Small Business Administration defines a small business in different classes depending on the type of industry it is involved in. Basically, the business size boils down to, "the largest a business can get (both in terms of employees hired and overall turnover) while still being considered a small business concern." While confusing in and of itself, we know that small businesses make up the backbone of America's economy and have done so from the earliest days of American economic freedom. Today, restaurants, craft breweries, barber shops, beauty salons, automotive shops, florists and all other types of retail businesses make up some of the most respected businesses in every city across the country.
Small businesses hearken back to a time when the American Dream was alive and well, fueled not by plastic products from China, but by honest, dedicated work. There are still people that conform to these ideals, and these people make up the basis of America's small businesses. Innovative ideas from a number of different catchment areas means that you can open up a business dealing with almost any type of good or service. Throughout America are new manufacturers, breweries, retail stores, coffee houses, retail boutiques and entertainment centers…just to name a few. These businesses are what fuel America's growth and help it to withstand times of economic uncertainty. By keeping true to the values that business owners before them have espoused, these local business owners serve as the platform that supports the American economy.
Nobody faces more challenges on a daily basis than business owners. In fact, for owners of small and medium sized businesses, handling many different challenges is the source of great satisfaction and some headaches, too.
But when business owners are asked to name their greatest challenge, one thing tends to top the list most often; access to capital. In other words, making sure there is enough capital flowing in to cover everything that needs to flow out.
Financing a small business usually requires a lot of creative means in order to come up with a viable financing strategy. There are a number of ways that small business owners can finance his or her business. Depending on the type of business, the expected return on investment and the complications that may arise financially, finding funding can vary. The scope of the project must be presented to any potential financiers in order to give them the gist of the business plan and use of funds.
So what options are available to a small business owner in their search for capital? In a perfect world, you’d walk into your local bank and walk out with a business loan. Well, those days are long gone! If your business isn’t profitable or over 2 years old, lack perfect credit, and aren’t willing to sign over you home as collateral, just for starters; there’s an 80% chance a bank loan is never going to happen. Thankfully, you do not have to rely on bank loans or stress about being automatically denied from your local lending institution. Alternative lenders and resources such as LVRG have many advantages over traditional bank financing, including:
What sources are available to finance working capital needs of small businesses?
Keep reading for 3 of the fastest, efficient and “obtainable” ways to access capital for your small business without the nonsense of a bank:
#1. Revenue Based Loan -
A revenue based loan could be your businesses lifeblood and provide it with several financial benefits. When your business is growing, chances are you'll need an injection of cash to continue its growth. Bank loans are often times too restrictive and near impossible to obtain these days. In this situation, a revenue based loan may be the best solution. If you use it wisely, a revenue based loan could do wonders for your business. Without being capitalized, chances are you will wind up in a growth stalemate. Here are three ways that revenue based loan can save your business:
Helps Grow Your Business
If your business is under 2 years old and starting to scale, you obviously want to ride the wave. You cannot do this without a dependable source of capital. Bank criteria is typically a minimum of 2 years in business, strong cash flow, positive ratios and perfect credit. However, a revenue based lender will fund newer businesses, with less stringent credit requirements and use of capital restrictions. This type of loan will give you a shortcut to cash since it only requires a few months of business bank statements; whereas banks require 2 to 3 year business and personal tax returns, income statement, balance sheet, personal financial statement, debt schedule and countless other documents to complete loan package. Many times, your bank statements are enough to demonstrate to a revenue based lender that you can repay your loan.
Get Cash Quickly
You're busy running a business, you don't have to time to compile overly detailed loan packages and chasing after loan sources. All you know is that you need cash quickly and even if you could get approved for a bank loan, is it really worth all the trouble? A revenue based loan will provide cash quickly with a very short turnaround time. If you are prepared to apply for a revenue based loan and have the appropriate supporting documents ready to go, you may be able to get funding in as little as 24 hours. Compare that to a bank loan where the loan process is on average 2 to 4 months. This is one of the main advantages of a revenue based loan. Some businesses actually consider this a lifesaver, and will go this route over a bank loan any day.
What is a bank statement small business loan?
No Lingering Debt
A revenue based loan will not weigh you down with long-term debt. When you obtain a revenue based loan, you will not be looking at 5 to 10 years to repay a loan for money that you're using today. Think about it, why would you want the headache of paying off a 2015 marketing campaign all the way into 2025? Not to mention, having this type of long-term loan could hurt your chances for getting funding in the near future, which all businesses will need if they plan to scale. With a revenue based loan, you will pay it off in roughly 6-12 months, which makes more sense for short-term expenses. Additionally, lenders are usually willing to replenish the loan after roughly 50% is paid down, so you can continue getting more capital along the way. One more point to mention, going the bank route you'll also have to be aware of up-front fees, equity injections, referral fees, packaging fees, guarantee fees, and closing costs.
As you see, the preceding three steps show you how a revenue based loan could be advantageous for your business. It helps you grow your business quickly and it does not saddle you down with long-term, highly encumbering debt. It gives you the cash that you need quickly, to grow your business your way. What more could a growing business need?