Tag: Fundraising

Small Business Fundraising: Let Me Count the Ways

Most people only think of loans when they think about funding a business.  Financing is for sure the most common way to do it, but not all financing comes in the form a traditional term loan.  Furthermore, there are options that are not even considered financing because you do not have to repay the funds. The truth is, small business fundraising may not look the way you expect it to.

Small Business Fundraising Can Happen in More Ways than You Thin

Small business fundraising can include loans, but it can also include investors, grants, and more.  Beyond that, if you do go with financing of some sort, there are other options out there besides traditional banks and credit unions. 

Demolish your funding problems with 27 killer ways to get cash for your business. 

Small Business Fundraising: Loans

When you think of loans you probably think of traditional loans.  These are the most popular, but they are not an option for everyone.  There are other types as well. 

Traditional Loans 

These are loans from traditional banks and credit unions.  As a business, your business credit score can help you get some types of funds even if your personal score isn’t awesome.  That isn’t necessarily the case with this type of lending however. 

With a traditional lender term loan, you are almost always going to have to give a personal guarantee.  This means, personal credit will likely weigh heavy on their decision.  If your personal credit score isn’t in order, you’ll probably have trouble.

How high does your credit score have to be?  Typically, if you have at least a 750 you are in pretty good shape. Sometimes you can get approval with a score of 700+, but the terms will not be as favorable. 

If you have awesome business credit, your lender might be more flexible. However, your personal credit score will still play a large role when it comes to terms and interest rate. 

These are the most popular choice for small business fundraising because they typically have the best rates and terms. However, they are also the hardest to get.

SBA Loans

SBA loans are traditional bank loans, but they have a guarantee from the federal government. The Small Business Administration, works with lenders to offer small businesses financing solutions that owners may not be eligible for based on their own credit history. Because the government is offering a guarantee, lenders are able to be more flexible when it comes to the owner’s personal credit score. 

In fact, it is possible to get an SBA microloan with a personal credit score between 620 and 640. These are very small loans, up to $50,000.  They may also require personal collateral. 

The trade-off with SBA loans is that the application process is lengthy. There is a ton of paperwork connected with these types of loans. 

Here are some of the most popular SBA loan programs.

7(a) Loans 

These are federally funded term loans up to $5 million. The funds can be used for expansion, purchasing equipment, working capital and more. Banks, credit unions, and other specialized institutions in partnership with the SBA process these loans and disburse the funds. 

This is by far the most popular of the SBA loan programs, and the funds are available for a broad range of projects, from working capital to refinancing debt, and even buying a new business or real estate. 

504 Loans 

These loans are also available up to $5 million.  Funds can buy machinery, facilities, or land. They are generally used for expansion, and private sector lenders or nonprofits process and disburse the money. They work well for commercial real estate purchases especially. 

Microloans 

Microloans are available in amounts up to $50,000. They work for starting a business, purchasing equipment, buying inventory, or for working capital. Community based nonprofits handle the administration of these programs as intermediaries.  Unlike most other SBA loan programs, financing comes directly from the Small Business Administration. 

Demolish your funding problems with 27 killer ways to get cash for your business.  

SBA Express loans 

These loans max out at $350,000.  The turnaround for express loans is much faster, with the SBA taking up to 36 hours to give a decision. The application process  is shorter also.  

SBA CAPLine 

There are 4 distinct CAPline programs.  The main difference between each is the types of  expenses they can fund. Each of them carries a maximum amount of $5 million and an interest rate that ranges from 7% to 10%. Funding can take 45 to 90 days. 

The four different programs are: 

  •  Seasonal CAPLines 

Financing for businesses preparing for a seasonal increase in sales.

  • Contract CAPLines 

Financing for businesses that need funding to fill a contract.

  • Builder’s CAPLines 

Financing for businesses taking on a real estate or construction project.

  • Working capital CAPLines 

Financing for businesses that are struggling with a short-term slump in sales.

SBA Community Advantage Loans 

This is a pilot program set to either expire or extend in 2020. It’s designed to promote economic growth in underserved areas and markets.  Those that make decisions about debt approval look over factors such as poor credit or low revenue if the business has the potential to stimulate the economy or create jobs in underserved areas. 

Private Non-Traditional Loans

These are loans from lenders other than traditional banks and credit unions that offer terms loans.  Usually they operate online.  The difference between these and traditional lenders is that the loans have looser approval requirements and a much faster application process. Most often you can simply apply online, get approval in as little as 24 hours, and the funds are in your account within 24 to 48 hours after approval. Here are just a few options for this type of small business fundraising.

Funding Circle

If you are looking for a  low APR, go with Funding Circle.  They have fixed rate term loans and require a credit score of 620 or above.  There is no minimum revenue requirement.  However, they do require you to be in business for at least 2 years.  

OnDeck

OnDeck offers lines of credit and term loans with fixed interest rates.  You can get up to $500,000 with a term loan.  The minimum FICO they require is 600.  In addition, you must have $100,000 minimum annual revenue and be in business for at least one year.  

Rapid Finance

With a large selection of financing products that includes term loans, Rapid Finance can be a great option for larger amounts.  In addition to term loans, they offer bridge loans, healthcare cash advances, and lines of credit.  Terms are from three to six months.  Amounts range from $5,000 to $1,000,000. Unfortunately, they do not make their minimum credit score readily available. Still, you can use their quote tool. It will give you an idea of what you qualify for. 

StreetShares

StreetShares offers invoice financing, term loans, and lines of credit.  There is only a one year time in business requirement.  Also, they require less minimum annual revenue than the others at only $25,000.  The minimum credit score is 600.  

Small Business Fundraising: Other FinancingSmall Biz Fundraising Credit Suite

In addition to term loans, there are other types of financing available for small business fundraising.  

Lines of Credit

This is basically the traditional lender’s version of a business credit card. The credit is revolving.  That means you only pay back what you use, just like a credit card. Rates are typically much better than a credit card however.  The application and approval process is more similar to that of a traditional term loan than a credit card.

If you need revolving credit and can qualify for a term loan, this is the best of the available business money types for you. It is great for bridging cash gaps and covering short term expenses without the high credit card interest rates. 

Unlike credit cards, there are no cash back rewards or loyalty points with a line of credit.  As a result,  some business owners prefer business credit cards despite typically higher rates.   

Invoice Factoring

If you are an established business with accounts receivable, you have invoice factoring as an option. This is where the lender buys your outstanding invoices at a premium, and then collects the full amount themselves. You get cash right away, without waiting for your customers to pay the invoices.

This is a good option if you need cash fast, or if you do not qualify for other types of funds. The interest rate varies based on hold old the invoices are.  A merchant cash advance is a similar option, in which a lender lends cash based on average daily credit card sales. Repayment is made daily credit card sales as well. 

Small Business Fundraising: Crowdfunding

Crowdfunding is a newer option for finding investors. While the average Joe that wants to start a business needs funding, it is not always possible to find one or two large investors. With crowdfunding, you can literally have a “crowd” of investors fund your business $5 and $10 at the time. 

There are many crowdfunding sites, but the most popular are Kickstarter and Indiegogo. The platforms are similar but there are some important differences. The most obvious is the timing of when you actually receive the funds that others invest in your company.

Kickstarter requires a preset goal, and you do not receive your funds until you reach your goal. For example, if you set a goal of $20,000 when you start your campaign, you will not receive any money that investors offer up until you reach that $20,000. 

Indiegogo also requires a goal.  In contrast to Kickstarter, they offer the option to receive funds as you go if you prefer. They also have an option called InDemand. This program allows you to continue raising funds after your original campaign is over without starting a whole new campaign. It is more of an extension of the first one.

There are other crowdfunding sites out there as well. Different ones work better for certain businesses and vendors. To determine which one you might have the most luck with, you will need to do some research. Keep in mind your type of business and the specific business each one appeals too. 

Small Business Fundraising: Angel Investors

These are informal investors that generally invest at the start of a company. They typically receive equity in exchange.

Demolish your funding problems with 27 killer ways to get cash for your business. 

Angel investing is risky.   If a startup fails early on, investors will lose their investments completely. As a result, professionals will look for a defined exit strategy, acquisitions, or initial public offerings (IPOs).

The best way to find angel investors is to ask around. You can also try an angel investors website or network. 

Small Business Fundraising: Grants

While grants are less commonly available than other options, they are more common that you probably think. Typically, they are offered by professional organizations. There are some government grants available also. There is stiff competition, but they are definitely worth a shot if you think you may qualify. 

While requirements vary from grant to grant, and most are only awarded to a certain number of recipients, they are definitely worth exploring.  This is especially true if you fall into one of these basic categories. 

  • Women owned business
  • Minority owned business
  • Businesses run by veterans
  • Businesses in low income areas

There are also some corporations that offer grants in a contest format that do not require much other than that you meet the corporation’s definition of a small business and win the contest. 

Small Business Fundraising: Explore All Your Options

When you need to think about small business fundraising, be sure to consider all your options.  It may be that traditional loans will work best for you, but that may not be the case at all. Even if you do qualify for loans, why not consider grants and investors as well.  It’s free money. Any money you can get that will reduce the amount of debt you have to take on is a good thing. 

If you want to expand your opportunities even further, work on the overall fundability of your business. There are things affecting it that you probably don’t even realize can make a difference.  There is a lot more to it than just your credit score.  

How you set up your business, your business phone number, and even past speeding tickets can indirectly affect fundability.  If you work to reduce negative impact and increase positive impact on fundability, you can open the door to even more small business fundraising opportunities. 

The post Small Business Fundraising: Let Me Count the Ways appeared first on Credit Suite.

Business Fundraising: What You Didn’t Learn in Kindergarten

Most of us grew up hearing that we could do anything we wanted.  That’s the beauty of capitalism. With American business lending, anyone can start a business. We are told all we need is a great idea, and with a lot of hard work and a business loan, we can turn that idea into a … Continue reading Business Fundraising: What You Didn’t Learn in Kindergarten

Business Fundraising: What You Didn’t Learn in Kindergarten

Most of us grew up hearing that we could do anything we wanted.  That’s the beauty of capitalism. With American business lending, anyone can start a business. We are told all we need is a great idea, and with a lot of hard work and a business loan, we can turn that idea into a thriving livelihood.  The thing is, the business fundraising piece isn’t as easy as we may have thought. 

Business Fundraising Hinges on Fundability

I mean, the majority of us are smart enough to know that not all new businesses see success.  We also know getting investors and loans is not always easy. The thing is, no one tells us what to do if business fundraising turns out to not be as easy as we thought.  No one really gives any options, which means when we hit that first brick wall of a lender turning us down for a loan or an investor saying no, we don’t know what our next move should be.

Get our business credit building checklist and build business credit the fast and easy way.

Business Fundraising: Why Loans Don’t Always Work

For starting up a small business, the first stop on the business fundraising train is typically the bank.  You go in, fill out a business plan, and hope for the best. If your personal credit is stellar, you are golden.  If not, you have a problem.  

That’s why traditional loans do not always work.  If your personal finances cannot handle the up-front expense of starting a business, and you do not have investors, you have to find another way. This is the part that no one tells you.  How on earth do you start a business if you cannot get a business loan based on your personal credit. 

Business Fundraising: Loans to Apply for When Traditional Loans Will Not Work

Okay, so, here’s the thing.  You are going to have to get your business going a little at the time, on your own.  Surprisingly, this strange economy created by the coronavirus is prime for this.  Maybe you take on a few clients or sell to a few customers in your spare time. Who knows?  You need to be in business for at least 6 months before you start applying for these types of loans.  In fact, some require a year in business and a minimum revenue.  

They key is, you get started, and you get started on your own.  Then you figure out where you can turn for business fundraising to grow your business further.  If you hit the one year in business mark, you may qualify for SBA loans.

Business Fundraising: SBA Loans

The Small Business Administration is designed specifically to help small businesses.  Whether you need working capital or a natural disaster has struck, the SBA can help. 

Overall, there’s a wide range of products offered through SBA programs.  Typically, the SBA does not lend funds directly. Conversely, they work through lender partners to guarantee loans. This means, they are able to leave the administration of the loans and disbursement of funds to those who regularly handle that sort of this.

7(a) Loans

This is the Small Business Administration’s most popular loan program. It offers federally funded term loans of up to $5 million. Additionally, the funds can be used for expansion, purchasing equipment, working capital and more. Banks, credit unions, and other financial institutions, in partnership with the SBA, process these loans and distribute the funds. 

A credit score of 680 is necessary to qualify.  In addition, there is a required down payment of at least 10% for the purchase of a business, commercial real estate, or equipment. Lastly, the minimum time in business is 2 years. Business experience equivalent to two years will do the trick for startups, so this is one you don’t have to wait for if you have experience. 

504 Loans 

These loans are available up to $5 million.  Funds can buy machinery, facilities, or land. Generally however, they are for expansion. Private sector lenders or nonprofits handle these loans. They especially work well for commercial real estate purchases. 

Microloans 

Microloans are available in smallter amounts. They go up to $50,000. Typically, they work well for starting a business, purchasing equipment, buying inventory, or for working capital. Community based non-profits administer microloan programs. Unlike the others, financing comes directly from the Small Business Administration.

Even though SBA loans have less stringent requirements, sometimes they still won’t do the trick.  What then? 

Business Fundraising: Private Loans to the Rescue

If you see that you do not qualify for SBA Loans, private loans could be an option.  They should be the second option for business fundraising, after SBA loans. Here’s why.  They typically have higher interest rates and less favorable terms than traditional and SBA loans.  That’s the downside. The upside is that their eligibility requirements are even easier to meet than SBA loans, making them a viable option if you do not qualify for other types of financing. 

There are lots of private lenders out there, but be careful.  Do your research, check the Better Business Bureau, and read reviews so that you know what you are getting into.  Some of them are fine, but there are a lot of bad seeds in this category as well. Proceed with caution. Here’s a list of lenders to get you started. 

Fundation

Fundation offers an automated process that is super-fast. Originally, they only had invoice financing. Then they added the line of credit service. Repayments are automatic, meaning they draft them electronically.  This happens on a weekly basis.  One thing to remember is that you could have a repayment as high as 5 to 7% of the amount you have drawn, as the repayment period is comparatively short.  

You can get loans for as little as $100 and as high as up to $100,000, but the max original draw is $50,000.   They do have some products that go up to $500,000.  There is no minimum credit score requirement, but they require at least 3 months in business. Also, $50,000 or more in annual revenue and a business checking account with a minimum balance of $500 are necessary.

Fundation reports to Dun & Bradstreet, Equifax, SBFE, PayNet, and Experian, making them a great option if you are looking to build or improve business credit. 

BlueVine

The minimum amount available from BlueVine is $5,000 and loans go up to $100,000.  You must have annual revenue of $120,000 or more.  In addition, the borrower must be in business for at least 6 months. The personal credit score minimum is 600. It is also important to know that BlueVine does not offer a line of credit in all states. 

They report to Experian.  They are one of the few invoice factoring companies that will report to any business credit bureau. 

Get our business credit building checklist and build business credit the fast and easy way.

OnDeck

With OnDeck, applying for financing is fast and simple. You apply online, and you will receive your decision once the application processing is done. Loan funds go directly to your bank account. The minimum loan amount is $5,000 and the maximum is $500,000.

The personal credit score requirement is 600 or more.  Also, you must be in business for at least one year. The annual revenue requirement is at least $100,000. In addition, there can be no bankruptcy on file in the past 2 years and no unresolved liens or judgements. 

OnDeck reports to the standard business credit bureaus.

Business Fundraising: How to Not Worry About It

Okay so, that’s how to make it work in the beginning.  Still, wouldn’t it be great to not have to worry about it? How would it feel to know that, if you needed a business loan, you would have no trouble getting one?  How does that even happen? 

While there are no guarantees in life, the best chance you have at making this happen is to build strong business fundability. That is your ability to get funding for your business based on the merits of your business and not completely on your own personal finances.   To do this, you have to understand exactly what it is that makes your business fundable. There are a lot more working pieces than you may imagine. 

Business Fundraising: Fundability

The first step in building fundability has to do with how you set up your business.  Regardless of whether you are just getting started or if you have been operating for ages, if these things are not done, do them now.  The sooner the better. You cannot build business fundability if you do not establish your business as an entity separate from yourself, and that doesn’t just happen.  You have to make it happen. 

Don’t Share Contact Information with Your Business 

Make  sure your business has its own phone number, fax number, and address.    That doesn’t mean you have to get a separate phone line, or even a separate location.  You can still run your business from your home or on your computer. There are options for virtual business addresses and internet based phone numbers that will serve these purposes nicely.

Apply for an EIN

Next, get an EIN for your business.  This is an identifying number for your business that works in a way similar to how your SSN works for you personally.  It’s free from the IRS.

Incorporation is Non-Negotiable

You have to incorporate your business as an LLC, S-corp, or corporation. Which option you choose doesn’t really make a difference for fundability.  However, it can make a difference for your budget and needs for liability protection.  Talk to your attorney or a tax professional about which one will work best for your business. 

 You are going to lose any time in business that you already have.  When you incorporate, you become a new entity.  You basically have to start over. You’ll also lose any positive payment history. This is why you have to incorporate as soon as possible.  

Separate Bank Accounts

Open a separate, dedicated business bank account.  There are a lot of reasons for this, but the first one is that it creates the separation you need to start building business credit, which is necessary to fundability.  

Licenses

A legitimate business should have all of the licenses it needs to run.  If it doesn’t, red flags are going to go up all over.  Research what you need to do to ensure you have all of the licenses necessary to legitimately run your business at all levels. 

Website

Spend the time and money necessary to make sure your website is professionally designed and that it works.  Also, splurge and pay for hosting. Don’t use a free hosting service.  Along these same lines, your business needs a dedicated business email address.  Make sure it has the same URL as your Website. Don’t use a free service such as Yahoo or Gmail. 

What Else Affects Fundability?

While setting up your business in this way is vital, there are a host of other things that affect fundability. Here’s a brief rundown. 

  • Business Credit Reports

This is a cornerstone of fundability.

  • Other Business Data Agencies 

Two examples of this are LexisNexis and The Small Business Finance Exchange. 

  • Identification Numbers 

Specifically a D-U-N-S number.  Get one on the D&B website. You cannot have a business credit file with Dun & Bradstreet without one.  Since they are the largest and most commonly used business credit agency, you have to get this number.

  • Business Credit History

This includes how many accounts you have, what types of accounts, and whether or not you pay on time. 

  • Business Information

Not only do you have to have separate contact information for yourself and your business, you need to be consistent with when and where you use it.  For example, if a business account has your personal address on it, it could cause problems. Be sure to keep everything up to date. 

  • Financial Statements
  • Business Financials
  • Personal Financials
  • Bureaus

One example is ChexSystems, which keeps track of bad check information.  

  • Personal Credit History
  • The Application Process

This is everything to do with the application from when you apply to which lending products you choose to apply for.

Get our business credit building checklist and build business credit the fast and easy way.

Business Fundraising: Don’t Let the Traditional Loan Brick Wall Stop Youbiz fundraising Credit Suite

If you hit a brick wall with traditional loans, don’t despair. Don’t let problems with business fundraising stop you.  Just fix the problem. There are other options. In addition to these financing options and finding investors, you can explore grants and crowdfunding.  While the fierce competition with each can make it hard, they are still viable options. However, you have to start working on fundability now, wherever you are in the life of your business.  If you do, one day you will not have to worry about business fundraising. You will be able to access all you need.

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