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July 19, 2018
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Business Financing Options 2018

Starting or expanding a business can be challenging and often impossible for those without the right financial partner looking out for you and your business. That’s why many business owners opt for traditional business loan financing through reputable, established lenders to secure the funding they need to hire additional employees, purchase new equipment and expand their operations.

No matter the source or method of your intending funding, the following options have been proven to be tried-and-true options for business owners seeking additional funding. It is essential to educate yourself on these options, which is why we’ve provided a brief breakdown of the most reliable, top seven: SBA loans, microloans, private lending, lines of credit, personal business loans, crowdfunding, and grants.

Small Business Association Loans
There are a bevy of government-backed Small Business Association (SBA) loans available to both current and prospective business owners with little, or no capital. According to SBA.gov, “When traditional business loans under reasonable terms are unavailable the SBA can help eligible small businesses obtain loans from participating SBA lenders.” SBA.gov and financial institutions that provide SBA loans will walk you through the process of what is required to qualify for the government secured loan.

Microloans
Microloans are short-term loans with relatively low-interest rates often utilized by self-employed individuals and new start-ups with minimal capital requirements. While many financial institutions and online lending sources offer microloans, the SBA-backed business loan programs also offer these loans ranging from $500-$50,000.

Private Lending
Whether from friends, family, or business acquaintances, securing funding from private sources carries more risk but may offer better terms depending on your history and relationship with these groups or individuals. Private financing is more and more common in these days of venture capitalists and private equity firms, but you’ll want to investigate the loan options carefully should an offer come forward.

Credit Cards and Lines of Credit
For most Americans, credit cards have increasingly become a security blanket for business owners in need of emergency funds or short-term financing for purchases. Depending on your credit score and history, your ability to borrow and secure lines of credit through traditional financial institutions can vary. If your credit history is poor, you may be limited to using secured credit cards, which typically carry higher fees than conventional credit cards. When comparing interest rates of credit cards to a line of credit, the line of credit will usually have a lower interest rate than a credit card which means using caution when you’re purchasing with plastic.

Personal Business Loans
Though an increasingly attractive and popular option for new or first-time business owners seeking financing, personal business loans are difficult to secure without strong personal credit and proven business income. They are a convenient option for businesses who don’t qualify for an SBA-backed loan or need additionally funding that the government secured loan standard cap of $50,000. However, for those seeking a small amount of money to purchase equipment or develop an early-stage strategy or initial hiring process, they’re an attractive option for qualified borrowers.

Crowdfunding
This is perhaps the most difficult and least-reliable form of funding available today. Despite some successful products and services launched via platforms like Indiegogo and Kickstarter, there’s no tried and true recipe for success on crowdfunding platforms. In fact, the average Kickstarter campaign only raises about $7,000 and lasts nine weeks — do these numbers sound like they can support the sustainability of your business ideas? While traditional business models don’t often correlate to the crowdfunding world, if anything, it is a good way for inspired entrepreneurs looking to test their market and see what a public response to a crazy idea might be.

Grants
There is no shortage of privately and publicly-funded small business grants throughout the US. Some people choose locally-oriented groups that provide information on small business grant funding, like Prospera Business Network located in Bozeman, Montana which also includes bridge loan financing. Others may fall into the category of statewide, regional, or national programs. If you’re a member of the U.S. military, you have additional financing options available to you through small business grants oriented at veteran-owned companies. Check with your local small business administration office or community development program to see what options are available in your area.

Whatever your company’s future plan is, it doesn’t hurt to discuss your business loan options with a dedicated, community-oriented lending partner. It’s a good idea to do some prep work before reaching out to your local bank, such as cleaning up your credit report, finalizing your business plans, looking for personal collateral options to guarantee your loan, and most importantly, be prepared to invest your time and resources into your business. To learn more about Bank of Bozeman’s business lending options or to speak with a small business lending professional, contact us to schedule an appointment or stop by the branch today.

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