Anyone operating a small business these days knows credit and financing for growth (let alone daily operations) is tighter than ever. While traditional lenders have tightened credit and reporting requirements, more small businesses are turning to alternative financing.
Searching for financing doesn’t have to be overwhelming. With proper planning and by following best practices, your business could be the perfect candidate for alternative funding solutions to secure the capital you are seeking.
We’ve noted five important areas that many small business owners should be thinking about before considering alternative financing.
1) Current on Payments. Many finance companies like to make sure a business is up to date on expenses and payments. Having a good track record builds trust that your business is stable enough to repay your financing.
2) Healthy Bank Balances. Most alternative finance companies require a business to have a minimum monthly gross revenue. Underwriters will often ask for up to six months of bank and credit card statements. It’s always recommended to have these statements close by when applying.
3) Positive References. A positive reference from a landlord or vendors could be the difference between getting financing and not getting financing. If possible, ask for a reference letter ahead of time to increase the chances of getting approved.
4) No Open Bankruptcies. It’s important to get all outstanding debt, liens and bankruptcies taken care of before applying for alternative financing. Although there are programs that can work certain liens, you must be honest with the company you are applying to throughout the entire process.
5) Credit Score. Although credit is not the determining factor when seeking alternative financing, many companies require a bare minimum. Know your FICO score before applying to ensure you receive the best and most reliable offer.
Before considering an alternative financing company, small business owners should research and know their options. Before signing any contracts, make sure you are comfortable and feel confident that the company you choose is responsible, established, and a reputable partner to work with.