Tag: You’ve

7 Marketing Lessons Learned from Billion Dollar Companies You’ve Never Heard Of

You’ve heard of Apple, Facebook, Microsoft, Google, and even Amazon. It doesn’t matter where you live in the world, the chances are you have heard of those companies.

But have you ever heard of Danaher, Fortive, AmerisourceBergen, Centene, or Archer Daniels Midland?

I bet you haven’t heard of any of those companies.

These companies aren’t small either. Here’s how much revenue each of them generates a year:

  • Danaher – $29.45 billion
  • Fortive – $5.25 billion
  • AmerisourceBergen – $213 billion
  • Centene – $118 billion
  • Archer Daniels Midland – $85.25 billion

Now that’s a lot of revenue. These companies didn’t get to where they are by accident either. And although they might not be as “sexy” as Nike or Apple, they still generate a lot of cash.

We don’t work with all the brands that I mentioned above at my ad agency, but we do work with some of them as well as dozens of other billion-dollar companies you have never heard of.

And although our primary objective is to help our clients (which we do, hence we were awarded agency of the year and the 21st fastest growing company by Inc Magazine), we also learn a lot by consulting with over a hundred publicly traded companies.

Here are some of the marketing insights that you aren’t thinking about that billion-dollar companies leverage on a regular basis.

Lesson #1: The riches are not in the niches

Marketers always talk about finding a niche and how it is easier to market in a niche.

That is totally wrong. It’s not easier to market in a niche.

Think of it this way… what’s easier to do… rank number 1 for the term “credit cards” or “heatmap analytics tool”.

It of course is easier to rank for terms like “heatmap analytics tool”, which funny enough is what one of my former companies does.

But what happens if very few people ever search for terms like heatmap analytics? Sure you’ll get high rankings so you could claim it is easier to do marketing for that product, but if you barely get any traffic and sales from that term does it really matter?

See, rankings don’t mean much. All that really matters is are your marketing efforts paying off.

To keep it simple, are your marketing efforts driving you revenue profitably?

And although niche industries aren’t as competitive, it is harder to generate sales or even traffic. But if you go broad and you go after industries that are applicable to everyone, such as health insurance, it’s much easier to get traffic.

Sure you probably won’t get anywhere near the amount of traffic as the competition, but even if you get 1/100th of the traffic you can still build a big business.

That’s why I don’t go after niches. I go after massive TAMs (Total Addressable Market).

And yes health insurance isn’t sexy but United Health Care, a company most people don’t think about, generates $287 billion dollars a year in revenue.

The bigger the market, the more customers, and the easier it is to make some money. Now, it will be harder for you to win and be the top dog within that industry but hey you don’t have to win in order to generate enough income to be happy.

A prime example of this is one of my friends used to have a best man speech website where he sold speeches to people. He ranked at the top of Google, was the most popular site within the space and he couldn’t figure out how to generate more than $200,000 a year.

Good income nonetheless, but when he put the same effort into the education space, he was nowhere near the most popular site, heck people took him for granted… but he was generating millions a year in profit with the same effort.

As Rich Barton (founder of Expedia and Zillow) once said, it takes the same effort to swing a home run as it does to hit a single or a double. So might as well swing for the fences every time.

Lesson #2: Easier to market multiple products

Similar to lesson number 1, your market size keeps expanding as you continually introduce more products.

The familiar big brands that you know of have many products.

Amazon has ecommerce, streaming, cloud computing, grocery stores, etc.

Google has search, android, self-driving cars, Nest, etc

Apple has phones, laptops, iPads, computers, headphones, etc.

But it isn’t just the well-known brands that have multiple products.

Look at how many business units Danaher has. Same with Fortive, they have tons of business units.

I can’t think of one multi-billion dollar company that I know that doesn’t have multiple products or services.

And if you can think of one, I bet they will have multiple product offers, it is just a question of when. It’s how successful companies continually grow. You have no choice but to expand.

So if you want to grow your traffic or sales, think about what other products you can start offering that your current customers would want.

You can then cross-sell, which should help on the revenue end. But you can also expand your marketing. Just think about all the new paid media or SEO campaigns you can kick off the moment you have more products to sell.

It’s one of the simplest ways to scale your growth.

Lesson #3: The best marketing is word-of-mouth marketing

I first started out in marketing learning SEO and become good at it (or at least I think I am decent at it).

I then got into social media marketing with Digg, which doesn’t really exist in its old form, but it used to drive 20,000 plus visitors to your site in a day if you got on the homepage.

Then I started to learn conversion optimization, email marketing, paid ads, and pretty much all forms of online marketing.

I always thought that you build big business through marketing. And to do well with that you have to take an omnichannel approach.

And although it helps it’s not how you grow into a billion-dollar business.

Luckily from working with some of these unknown multi-billion dollar companies, I’ve gotten to know many CMOs as well as CEOs of some of these companies.

When I ask them what’s their number one marketing channel, do you know what they all tell me?

It’s word-of-mouth marketing or variations of it. In essence, other people telling others about your company, your product, your service… it is how you win.

So then I went on to ask these people, how do you generate more word-of-mouth marketing? When I took all of their responses and aggregated the data, here is what people said were the top 3 ways of getting more word of mouth:

  1. Be in business for a long time – no matter what you are selling and no matter how great it is, word-of-mouth marketing doesn’t happen overnight. People need to be patient and give it 10 plus years for it to fully kick in.
  2. Have an amazing product or service – if your product is great you will have more word-of-mouth marketing. And if it is terrible you will either have little to no word-of-mouth marketing or even worse, you will have it but it will be people talking negatively about you.
  3. Build a big organization – having thousands of people work for you is marketing. Whether it is people listing your company on their LinkedIn or your employees telling other people about your company, having a big labor force working for you is a great way to spread your brand out to the masses.

Lesson #4: Ugly is sexy

Do you need a new pair of shoes? It would be nice to have the latest Jordan shoes, but do you really need them?

Do you need the new iPhone? Again it would be nice to have it, but I bet your old iPhone lets you order food, send text messages, make calls or even check your emails well enough.

Maybe the camera isn’t as good as the new phones, but I bet you don’t use your phone for high-end photography and more so just use it to take selfies… so the new camera isn’t really needed.

But what about industries like payroll? Do you think a business can just stop using its payroll provider?

Well if they do stop, their employees won’t be paid and they won’t have a business.

That’s why companies like Ceridian are so popular. Again, you probably haven’t heard of them but they generate $1.02 billion a year.

Why?

Because they provide payroll services. Businesses can’t just stop using them unless they want to have their employee go unpaid and be pissed at them.

And even if you choose not to use Ceridian for payroll, the chances are whoever you use, pays them for their tax infrastructure as they are one of two companies who help calculate tax information for payroll in the United States.

And building a system that helps calculate payroll tax payments in the United States is complicated. If you get it wrong there are penalties, which is a big liability for any company.

When building that system, you have to think about each state within the United States as well as each county and city as they all have their own tax rules which also constantly change.

In other words, there is a lot of money in building ugly businesses that people need.

You don’t see kids growing up talking about building software to help with payroll taxes. Instead, they talk about creating a new fashion brand or getting paid to be an influencer.

Lesson #5: the United States is not the center of the world

I live in the United States and love this country.

Yes, it has issues, but all countries have problems…

But the United States is by no means the center of the world. The majority of the 7.7 billion people in this world don’t live in the United States. They actually live in other countries.

At my ad agency NP Digital we have people who work with us all over the world. And we have offices in places like India, Brazil, Canada, Australia… and the list goes on and on.

We don’t have these offices for outsourcing as many people would assume. We have these offices to help people out with their marketing within those regions.

For example, why would companies like Cisco want to market to people in India? It’s a booming market.

Even my CEO, he was the president of a division within a publicly traded company. That division had over 4000 employees. And can you guess what percentage of their revenue came from the United States?

Roughly 26%. That means roughly 3/4 of their revenue was coming from regions outside of the United States.

Going global makes it easier for you to get more traffic because there is a bigger pool of people for you to target and in many cases, it is less competitive.

That was one of the instrumental strategies for our fast growth at NP Digital, in which we expanded globally (and we are still adding more regions).

We did this using this strategy. As it helped us get leads and traffic from countries all around the world.

Lesson #6: Your marketing is only as good as your team

Years ago I created a startup called KISSmetrics that failed.

It was a web analytics company that raised $16.4 million from investors.

I had an investor who sat on our board named Phil Black from True Ventures. Overall awesome guy and I loved him as a board member.

I remember him continually giving one piece of advice…

As an entrepreneur you don’t have to figure everything out or do everything on your own, instead you need to hire amazing people. People who have done what you are looking to accomplish and have done it before in your exact industry.

In other words, Phil kept pushing us to hire amazing people for every role.

For example, if you are an ad agency and you need to do better with sales, hire the head of sales from one of your competitors who you know is crushing it. It may cost you a lot of money, but there is a higher chance that they will know exactly what you need to do in order to succeed.

Versus just hiring a head of sales from a random industry because they won’t know your industry and what they need to do in order to succeed.

I wish I understood the power of what Phil was trying to teach to me when we founded the company in 2008. Because if I truly understood it, I would be much further along in my career.

With NP Digital we took that advice to the extreme. Our CEO was the President of iProspect, the largest performance marketing agency (aka a competitor).

Our head of client services came from there as well.

Our COO was in charge of all performance marketing fulfillment at Dentsu, which meant she was in charge of over $1 billion in revenue.

My co-founder and I continually look for the best people. As that is the way to really grow fast.

That’s what large corporations do.

You need to also do that with your marketing. From the person running your marketing division to each individual player such as your SEO or paid media manager.

Do they have industry experience? If not, they may not perform that well.

Did they continually get promotions at their previous jobs? If they didn’t then they may not be as great as they claim to be. It doesn’t matter how good people claim to be, if they didn’t continually get promotions at their previous jobs it means that others didn’t find them as valuable as they claim to be.

These are 2 things to consider when hiring marketers or any role for that matter of the fact. Yes, you want people who are a cultural fit, but you also want people who worked for competitors and continually got promotions and raises in the past because it usually means they did a good job.

Lesson #7: You have to build a brand to do well in the long run

What do you think the most popular search term is on Google within the United States?

Common, take a guess…

It’s actually the term “Facebook”.

Guess what the second most popular search term is?

It’s the term “YouTube”.

The 3rd most popular search term is Amazon. The 5th is Google, 6th is Walmart, and the 7th is Gmail.

Notice a trend here?

The most popular search terms, not just in the United States, but globally tended to be brands.

Just look at the brand Nike. In the United States, it is searched 6 million times a month. And the term shoes is only searched 1.2 million times a month. In other words, Nike gets more searches for the brand each month than the whole category of shoes.

Now, what do you think my most popular search term is that drives traffic to my business?

It’s actually not Neil Patel, it’s Ubersuggest.

Our second most popular term is another brand that we own… Answer the Public.

And the third most popular search term for us is my personal brand, Neil Patel.

To build a big business you need to build a brand.

SEO will only get you so far. Paid ads will only get you so far. To win people must love your product or service if you expect your brand to be big and do well.

If you are struggling to build a brand keep in mind that it just takes time. Don’t expect the world of results in the first 3 years. You’ll have to give it 5 plus years for your brand to start taking off.

Here is an article that I wrote that can help you build a brand and here is a video that can also help you out.

Conclusion

Learning from brands like Apple is great. They are an amazing company. Heck, I’m writing this blog post on a Macbook.

But it’s hard for people to replicate the magic Apple has with their business and even marketing.

On the flip side, it’s much easier for you to replicate the marketing strategies that these unknown multi-billion companies are leveraging because they work for all business types and they aren’t tough strategies to implement.

So, what other strategies have you learned from companies that many of us aren’t familiar with?

10 Kinds of Financing for a Small Business – Including Options You’ve Probably Never Heard Of

How Many Kinds of Financing for a Small Business Can YOU Name?

You may be surprised at the many kinds of financing for a small business there are.

Fundability

Any discussion of business financing has to start with fundability. Fundability is the ability of a business to get funding. It covers all the points a lender or credit provider will look at when they’re trying to figure out if you’ll pay back a loan or credit extended to you. These include factors you probably haven’t thought about or might think aren’t so important. Business details like address and entity all matter. But there’s more.

The 3 Cs Capital Acquisition Formula

When you think like a lender, you realize they just want to be sure that you’ll pay them back. Lenders look at one of three things for loan approval: cashflow, collateral and/or credit. The more of these “Cs” you have, the more funding options are available. For the forms of funding we’re showcasing today, we show you exactly what you need to have for approval.

Two More General Ways to Get Funding

If you have absolutely none of the 3 Cs, there are still two other options: selling a part of your business or grants and crowdfunding. Let’s look at types of funding covering all of these options. We’ll start with financing via your business’s cash flow.

#10. Financing for a Small Business with Cash flow: Cash Flow Financing

A loan made to a company is backed by a company’s expected cash flow. A company’s cash flow is the amount of cash that flows in and out of a business, in a specific period. Cash flow financing (or a cash flow loan) uses generated cash flow as a means to pay back the loan.

Cash flow: Cash Flow Financing: Terms and Qualifying

Often you will need to have a few years in business. You may need to meet a certain minimum credit score requirement. You will need to prove historical cash flow and present your accounts receivables and accounts payables. This way, the lender can determine how much to loan to your business.

#9. Financing for a Small Business with Cash flow: Merchant Cash Advances

An MCA technically isn’t a loan. Rather, it is a cash advance based upon the credit card sales of a business. A small business can apply for an MCA and have an advance deposited into its account fairly quickly. So you can offer Net 30 terms but not have to wait a month to get paid.

Merchant Cash Advances

A merchant financing program is ideal for business owners who accept credit cards and are looking for fast and easy business financing. An MCA program is designed to help you get funding based strictly on your cash flow, as verifiable per your business banks statements. Hence lenders in general will not ask for any burdensome document requests.

Terms and Qualifying

A lender will review 3 months of bank and merchant account statements. They are looking for is consistent deposits. And they want to see deposits showing revenue is $50,000 or higher per year. They will also verify time in business of 6 months or more.

Lenders are also looking to see that you don’t have a lot of Non-Sufficient-Funds (NSFs) showing on your bank statements. They want to see you don’t have a lot of chargebacks on your merchant statements. And they want to see that you have more than 10 deposits in a month going into your bank account. They want to see that you manage your bank and merchant accounts responsibly. And they want to see that have a decent number of consistent credit card transaction deposits each month.

Let’s move onto funding based upon collateral – either yours, or a credit partner’s, or from the business itself.

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

#8. Financing for a Small Business with Collateral: Inventory Financing

Inventory financing is a revolving line of credit or a short-term loan acquired by a company so it can purchase products for sale later. The products serve as the collateral for the loan. There may be restrictions on the type of inventory you can use. This can include not allowing cannabis, alcohol, firearms, etc., or perishable goods. There can be revenue requirements. And there may also be minimum FICO score requirements.

Terms and Qualifying

Get approved for a line of credit for 50% of inventory value, regardless of personal credit quality. Rates are usually 5 – 15% depending on type of inventory. You can get funding within 3 weeks or less. But it can’t be lumped together inventory, like office equipment.

#7. Financing for a Small Business with Collateral: Account Receivables Financing

You can use outstanding account receivables as collateral for financing. If you also have purchase orders,  you can get financing to have those filled. You won’t need to use your cash flow to do so. Get an accounts receivable credit line with rates of less than 1% with no consumer credit requirement. Receivables should be with the government or another business.

Terms and Qualifying

Get as much as 80% of receivables advanced ongoing in less than 24 hours. Remainder of the accounts receivable are released once the invoice is paid in full. Factor rates are as low as 1.33%. You can get an accounts receivable credit line with rates of less than 1% with no consumer credit requirement.

Now it’s time to move onto funding with good personal credit (FICO) scores.

#6. Financing for a Small Business with Good Personal Credit: Credit Line Hybrid

A credit line hybrid is a form of unsecured funding. Our credit line hybrid has an even better interest rate than a secured loan. Get some of the highest loan amounts and credit lines for businesses. Get 0% business credit cards with stated income. These report to business CRAs. You can build business credit at the same time. This will get you access to even more cash with no personal guarantee.

Terms and Qualifying

You need a good credit score or a guarantor with good credit to get an approval (a FICO score of at least 680). There are no financials required. You can often get a loan of five times the amount of current highest revolving credit limit account. So this is up to $150,000.

#5. Financing for a Small Business with Good Personal Credit: Bridge Loans

A bridge loan is a short-term loan used until a person or company secures permanent financing or removes an existing obligation. It allows the user to meet current obligations by providing immediate cash flow. Bridge loans are short term, up to one year. They have relatively high interest rates. And they are often backed by some form of collateral, like real estate or inventory.

Bridge Loans via Our Credit Line Hybrid

The Credit Suite Credit Line Hybrid has a term loan program. This bridge loan works as either an add-on to, or in lieu of, the program, when the applicant meets eligibility and is agreeable to either a portion (or all) of their funding, supplied in the form of cash term loans. There is a fixed monthly repayment.

Terms and Qualifying

The Credit Suite program is an aggregate program requiring multiple accounts to meet our prequalification. Get $25,000 to $300,000 per applicant. The APR is 7 – 24% depending on creditworthiness and selected term. Terms are 3, 5, or 7 years. You must have a 680 FICO or better, and over $35,000 in adjusted gross income. Actual pre-qualification will depend on Debt-to-Income ratio.

#4. Financing for a Small Business with Good Business Credit: Start with Vendor Credit and Retail Credit

Starter vendors are open to working with most businesses, even startup ventures. Make sure vendors report to the CRAs – not all do. Vendors report to the business CRAs within 60 days. They help you build your business credit profile and score. Terms will vary depending on the vendor, but they tend to be Net 30. And you will not need collateral, good personal credit, or cash flow.

Move onto Retail Credit

Retail credit comes from major retailers. Buy everything from office supplies to power tools. Retailers will check whether your business information is uniform everywhere. They will also check whether your business is properly licensed

Terms and Qualifying

Qualifications will vary, and there can be a minimum time in business requirement. There may even be a minimum number of employees requirement, or a minimum annual sales requirement. Terms can be revolving. You will need at least 3 (5 is better) accounts reporting to the business CRAs.

#3. Financing for a Small Business with Good Business Credit: Fleet Credit and Bank Credit Cards

Fleet credit is used to buy fuel, maintain vehicles of all sorts, and repair vehicles. Even businesses which don’t have big fleets can still benefit. These are usually gas credit cards. Requirements will vary. There may be a minimal time in business requirement. If your business doesn’t make the time in business requirement, you may be able to instead offer a personal guarantee or give a deposit to secure the credit.

A Look at Bank Credit Cards

More bank credit cards are more universal, like MasterCard. So they can be used pretty much anywhere. These cards may even have rewards programs. Terms can be revolving. Usually, you will need to have at least 14 accounts reporting to the business CRAs. There can be longer time in business requirements. And there may also be minimum number of employee requirements.

Now let’s look at financing you can get if you’re all right with sharing the profits and ownership of your business.

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

#2. Financing for a Small Business via Selling Part of Your Business: Angel Investing

Angel investors invest in small startups or entrepreneurs. Often, angel investors are among an entrepreneur’s family and friends. The capital they provide may be a one-time investment to help the business get started, or an ongoing injection of money to support and carry the company through its early stages. Angels are not covered by the Securities Exchange Commission’s (SEC) standards for accredited investors.

Angels could be friends or colleagues sitting on home equity, or local professionals who are looking to invest. Consider people you know well and people you don’t know so well. But keep in mind, you’re giving up part of your ownership in your business.

Angel Investing: Terms and Qualifying

Angels are informal investors so there really aren’t any terms. Technically, there is nothing done for qualifying although investors may (probably should) insist on a valuation of your business. But no matter what, it’s always a good practice to get everything in writing.

#1. Financing for a Small Business via Selling Part of Your Business: Equity Crowdfunding

This is not the same as reward-based crowdfunding (like from Kickstarter). Equity crowdfunding is a stock offering from a company that is not listed on stock exchanges. Equity crowdfunding has been around for less than 10 years. Potential investors visit a funding portal website. There, they can explore different equity crowdfunding investment opportunities. Note: there are limits on how much capital an individual can invest based on their income and net worth. Equity crowdfunding gives investors a stake in your business.

Terms and Qualifying

Equity crowdfunding tends to be covered by complex federal law. It is best practices to consult with an attorney well-versed in federal law, specifically, securities and corporations when it comes to interpreting terms and qualifications. A lawyer will also be able to comprehend any changes that may be made to these aspects of the law in the future.

Let’s move onto kinds of funding you don’t need to pay back.

Bonus #1. Financing for a Small Business via Federal Grants

Federal grants generally do not have to be paid back. Try HUD (Housing and Urban Development) for urban projects. Try the USDA (Department of Agriculture) for rural projects. Federal funding means paperwork. You often must show experience in what you are proposing.

Terms and Qualifying

Grants have varying qualifications. They are very competitive. Be sure to check information thoroughly. This includes due dates and any necessary paperwork. Some grants may offer preferences to businesses with minority, female, veteran, or disabled ownership.

Bonus #2. Financing for a Small Business via Reward-Based Crowdfunding

You can get money from the crowd for your business. Start with a service like Kickstarter. But make sure you read the fine print (always a good idea!). Many crowdfunding platforms make you give all the funding back if you do not make your goal by the end of the campaign. But Indiegogo has a flexible funding option.

Reward-Based Crowdfunding

Crowdfunding platforms will take a percentage of the donations. That’s how they make their money. Crowdfunding platforms may push to have you deliver on your promises. So you’ll have to actually manufacture a product or do whatever else your business is supposed to be doing. Given how much social media we’re all bombarded with these days, it should come as no surprise that donors can become weary of crowdfunding pitches.

Details

Crowdfunding tends to work best when donors can personally connect with a product or service. Straightforward businesses may not do so well. The kinds of businesses which do the best often associate with products not quite on the shelves yet, or artistic endeavors. But standard widgets will most likely not attract brand ambassadors. They probably won’t get donors too fired up. Because crowdfunding campaigns are time-consuming, it doesn’t make sense to try this form of funding unless you realistically feel your chance of success is better than 50%.

Terms and Qualifying

Terms will differ depending on which platform you use. Check and make sure your platform of choice will allow your industry to work with them. For example, even though recreational cannabis use is legal in Massachusetts, Kickstarter (for example) doesn’t allow fundraising for drugs, nicotine, tobacco, vaporizers, and related paraphernalia. Any major crowdfunding platform has a section for rules, a FAQ, or ‘how it works’. Be sure to read such a section thoroughly so you know exactly what you’re getting yourself into.

And now let’s look at funding via creative and different means you may not have considered or heard of before.

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

Bonus #3: Financing for a Small Business via 401(k) Financing

This is not a loan. You will not have to pay an early withdrawal fee or a tax penalty. You put the money back by contributing, just like with any 401(k) program. This means you won’t lose your retirement funds. This is a 401(k) Rollover for Working Capital program. The IRS calls it a Rollover for Business Startups (ROBS).

401(k) Financing

Per the IRS, a ROBS qualified plan is a separate entity with its own set of requirements. The plan, through its company stock investments, rather than the individual owns the trade or business. Therefore, some filing exceptions for individuals may not apply to such a plan. This type of financing isn’t a loan against, your 401(k), so there’s no interest to pay. It does not use the 401(k) or stocks as collateral. Instead, this is simply a movement or change of custodian.

Terms and Qualifying

Pay low rates, often less than 5%. Your 401(k) will need to have more than $35,000 in it. You can usually get up to 100% of what’s “rollable” within your 401(k). The lender will want to see a copy of your two most recent 401(k) statements. You can get 401(k) financing even with severely challenged personal credit. The 401(k) you use cannot be from a business where you are currently employed. You cannot be currently contributing to it.

Bonus #4: Financing for a Small Business with Microloans

Microloans are business loans with relatively low interest rates. Generally, these loans are offered to small or developing businesses with modest capital requirements and little to no revenue history. Microloans — as the name suggests — are smaller loans than a traditional bank loan. They generally offer anywhere from $500 to $50,000 in business financing.

Terms and Qualifying

Terms and requirements vary among providers. Kiva, for example, charges 0% interest. The Opportunity Fund provides loans to low- and moderate-income immigrants, women, and other underserved small business owners. Accion requires a cosigner. Check the specific requirements of any microloan program that interests you

Bonus #5: Financing for a Small Business via SBA 7(a) Loans

This the SBA’s most popular loan. The SBA guarantees 85% for loans up to $150,000. They guarantee 75% for loans greater than $150,000. The SBA makes the lending decision, but qualified lenders may be granted delegated authority to make credit decisions without SBA review.

Terms and Qualifying

The maximum amount on offer is $5 million. You will have to provide Articles of Organization, business licenses, documentation of lawsuits, judgments and bankruptcy or other pertinent documentation. Lenders are not required to take collateral for loans up to $25,000. For loans in excess of $350,000, the SBA requires that the lender collateralize the loan to the maximum extent possible up to the loan amount.

10 Kinds of Financing for a Small Business: Takeaways

There are all sorts of amazing ways to get business funding. You can find the one which fits your circumstances. This includes your strengths in areas like personal credit, collateral, cash flow, selling a part of your business, and getting grants or crowdfunding. Let us help!

The post 10 Kinds of Financing for a Small Business – Including Options You’ve Probably Never Heard Of appeared first on Credit Suite.

5 Small Business Loan Options (Some of Which You’ve Probably Never Heard of) 

What Small Business Loan Options are Out There and Which Ones Are Best for You

Funding a small business is no easy task.  There are an overwhelming number of funding options.  From small business loans to crowdfunding, and a seemingly infinite number of possibilities in between, it can be hard to choose.  For most, it will take some combination of these to get the job done.  It can help to know your small business loan options.  There may be more than you think.

Small Business Loan Options: Lenders

The first decision to make is what type of lender to use. A lot of business owners think that it’s a bank or bust.  There are a few different types of lenders to consider when looking at your small business loan options however.

Learn business loan secrets with our free, sure-fire guide.

Big Banks

These are those nation-wide institutions like J.P. Morgan Chase and Wells Fargo.  As a general rule, they are not a friend to small business.  There is nothing specific that they hold against smaller businesses.  It is simply that these businesses do not generally meet their lending requirements.  It’s all numbers.  If you don’t have the numbers, you don’t get the funding.

small business loan options Credit Suite2

Community Banks

Community banks are the smaller, local financial institutions.  They are the “hometown” banks, if you will.  These guys are friendlier toward small businesses.  They are able to look a little deeper and see a tad bit more than the numbers. Their small business loan options may have slightly less strict eligibility requirements.  However, it is still a numbers game.  Whatever those numbers are, whether credit score, annual income, years in business, or some combination, you will have to have them to be eligible.

Credit Union

Credit unions come in large and small sizes as well.  The main thing to remember is that you must be a member to get a loan from a credit union.  They do usually offer more favorable interest rates however. If you are a member of one, be sure not to count them out when shopping around for loans.

Alternative Lenders

Alternative lenders generally function online, though some do have brick and mortar locations.  Their main draw is that they offer small business loan options to those that may not qualify with traditional lenders.  Their credit score requirements are lower.  They may or may not require a certain amount of time in business or minimum revenue amounts.  The main drawback is that their small business loan options typically have higher interest rates.

Small Business Loan Options: Types of Loans

In addition to the types of lenders, there are various types of loans including:

●        Traditional

These are the standard loans that disperse a set amount of funds, with the borrower repaying over a certain period of time.  The payment is the same each month, and they can be either secured or unsecured.  Unsecured small business loan options usually have higher interest rates.

●        Line of Credit

This is revolving debt similar to credit cards.  Borrowers are given a maximum limit of the amount of funds they can use, but only pay back the amount that they actually use.  For example, a borrower may have a $5,000 line of credit and use $2,000 to buy a new printer.  They will only pay back $2,000, until the time comes that they choose to use more. Lines of credit can also be secured or unsecured.

●        Invoice Factoring

Factoring invoices is an option if you have receivables.   The lender basically buys unpaid invoices from you at a premium, meaning you do not get full value.  You then have immediate cash however, for those open invoices.  The lender collects from the consumer directly at full value.  The older the invoice, the higher the premium. This is due to the fact that the likelihood of collecting on the invoice goes down the older the invoice gets.

Learn business loan secrets with our free, sure-fire guide.

●        Merchant Cash Advance

If you accept credit card payments, a merchant cash advance can help you out in a cash pinch.  It is basically just what is says.  It’s a cash advance on predicted credit card sales.  They base the amount of the loan off of average daily credit card sales, and then take payment from future credit card sales. This usually happens electronically. Most often, the process is automatic.  The draw is that you get the funds fast, and there are usually more flexible options for repayment terms depending on your eligibility.

Small Business Loan Options: The Small Business Administration

No discussion of small business loan options would be complete without mentioning the SBA.  While they do not lend funds themselves, they do administer a number of loan programs that help small businesses get the funds they need through partner lenders.

7(a) Loans

This is the Small Business Administration’s most known program.  It provides federally funded term loans up to $5 million. The funds can be used for a number of purposes.  These include 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.

504 Loans

504 loans are also available up to $5 million and can buy machinery, facilities, or land. Typically, they are used for expansion.  They work especially well for commercial real estate purchases.

Microloans

These are $50,000 or less. They are good for starting a business, purchasing equipment, buying inventory, or general working capital.

SBA disaster loans

This is a program available to businesses that have fallen victim to natural disasters.  These loans are different because, unlike the others, the SBA actually processes them directly rather than using partner lenders.

SBA Express Loans

The turnaround for express loans is much faster, with the SBA taking up to 36 hours to give a decision. There is less paper work as well, making express loans a great option if you qualify.

SBA CAPLines

There are 4 different CAPLine programs.  They differ mostly in how the funds can be used. The maximum on each is $5 million.  It can take 45 to 90 days for the funding on CAPLines to come through.

Learn business loan secrets with our free, sure-fire guide.

SBA Community Advantage Loans

This is a pilot program.  It will either expire, or the SBA will extend it in 2020. Its purpose is to promote economic growth in underserved areas and markets. Decision makers look past such things as poor credit or low revenue if the business has the potential to create jobs or promote economic growth in underserved areas.

These are some of their most popular programs. The Small Business Administration does so much more for small businesses in addition to these.  Get more details on the SBA, these loan programs, and additional resources offered by the Small Business Administration here.

5 Specific Small Business Loan Options

Now, you are probably here because you need to know specifically where to go to get a small business loan.  As you have seen, the possibilities are endless.  However, here are some of our favorite online lenders for those that may be having trouble qualifying for loans.

Upstart

Upstart is a fairly new online lender that is using cutting edge technology.  They question whether financial information and FICO alone can really determine the risk associated with a specific borrower.  Instead, they are using a combination of artificial intelligence and machine learning to gather alternative data.  They then use this data in the credit decision making process.

Alternative data includes such things as mobile phone bills, rent, deposits, withdrawals, and even other information less directly tied to finances.  Software from the company uses this data, then learns and improves on its own.

They offer various types of financing products to fit a broad range of needs. From credit card refinancing to student loans, and pretty much anything in-between, there is something for everyone.  Debt consolidation and personal loans are included, in addition to business loans.

You can get a quote on a loan to start or expand a business.  Quotes are available online in a matter of minutes.  Learn more in this comprehensive review.

StreetShares

StreetShares started as a service to veterans.  Now, they offer term loans, lines of credit, and contract financing. They also offer small business loan investment options. The maximum loan amount is $250,000.  Pre-Approval only takes a few minutes. They use a soft pull on your credit so it doesn’t affect your score.

To be eligible, you must be in business for at least 12 months with annual revenue of $25,000. Exceptions are possible, with loans to companies in business for at least 6 months with higher earnings happening on a case by case basis. The borrower’s credit score must be at least 620. For more on StreetShares, see our in-depth review.

Kabbage

Kabbage is a well know online lender. They offer a small business line of credit that can help businesses accomplish business goals quickly. The minimum loan amount is $500 and the maximum is $250,000. They require you to be in business for at least one year and have $50,000 or more in annual revenue, or $4,200 or more per month in the previous 3 month period.

They are great if you need cash quickly. Also, their non-traditional approach puts less weight on your credit score, so they may work better for some borrowers than other lenders.

Fundation

Fundation provides both term business loans online and lines of credit. It is most known for its working capital funding options. These are funds meant to help cover the day-to-day costs of running a business rather than larger projects. Typically, these funds come in the form of a line-of-credit.

Their minimum loan amount is $20,000 while the maximum loan amount they offer is $500,000. They require you to be in business for at least 12 months and have annual revenue of at least $100,000. To be eligible, your personal credit score must be no less than 600. Additionally, you must have at least 3 full time employees.  That number can include yourself.  Business owners cannot live or operate their business in North Dakota, South Dakota, or Nevada.

SmartBiz

If you want the convenience of online lending but need to look toward products offered by the SBA, then SmartBiz is for you.

With the help of the Small Business Administration, SmartBiz offers loans that are government backed. While SBA loans typically take a lot of time and paperwork, SmartBiz found a way to speed things up.  This makes getting loans through the Small Business Administration easier than ever. The minimum loan amount is $30,000 and the maximum is $5,000,000.

As stated, SBA loans are government-backed business term loans for business owners who’ve had difficulty qualifying for other types of financing.  As such, the requirements are a little stricter. Your credit score has to be 650, and you have to be in business for 2 years or more. In addition, annual revenue has to be $50,000 at least, and there can be no outstanding liens, bankruptcies, or foreclosures in the past 3 years.

Knowing Your Small Business Loan Options Can Help You Make the Best Decisions

Of course, a lot of the choosing will be done for you based on your qualifications.  Your credit score, length of time in business, and annual revenue will make a difference.  Still, knowing where to start based on what you have to work with is a huge first step.

If you are eligible for a loan with a traditional lender, you may find the lowest interest rates there.  They tend to have the most favorable terms and rates.  Their online counterparts typically have higher interest rates, but the loans are easier to qualify for.

However, if you are struggling with credit or just starting out, one of these 5 options for alternative lenders could be great.  In addition, there is the option of traditional loans with the SBA programs, if you fall somewhere in between.  Whatever you do, don’t jump in without doing your research.

Shop around with a variety of lenders to compare what they offer, what their requirements are, and figure out which lenders and loans will work best for your specific business. A little time spent on the front end doing this can save you a lot of time and money after the fact.

 

 

 

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