As a small business owner, getting an initial commercial loan for a startup may not be the easiest thing in the world. Even with the United States economy turning around and companies seeing better consumer confidence add to their annual revenue, not every bank will be excited about receiving a startup loan application.
Not long ago, the federal government fed over $4 million into Troubled Asset Relief Program funding to assist banks with giving out funds to small businesses, but even that didn’t encourage lending. Most entities took the money for themselves, resulting in a similarly stagnant commercial loan market. Privately owned businesses are still making every attempt to stay active. They’re looking for alternative funding options to help offset their existing loans and their inability to secure new ones.
A Whole New Funding Arena
In the past, the internet has shown itself to be useful for just about everything: holiday shopping, locating housing, talking to friends next door, or meeting people on the other side of the planet; there are few if any, things that cannot be accomplished online. A rising trend in the alternative funding category, crowdfunding, has also proven invaluable to small entities in this area.
Businesses of all kinds and sizes have secured startup and extra financing assistance from interested donors online. Because of the amounts given, businesses aren’t always required to hand over shares of the organization or even claim them on tax returns, Forbes noted, so long as the total amounts received don’t exceed a certain dollar value. Websites like Kickstarter can also help with established firms, asking entrepreneurs to explain what product or service they’re raising money to fund specifically and setting a goal with how much they feel they need to raise for the project to succeed. Online users donate and vote for specific programs, helping boost corporate visibility and money for long-term or short-term use, depending on the nature of the fund.
Finding the Means
When it comes to getting money to make small business dreams come true, online banking can help entities keep track of their current financial health, but putting money in these accounts could require some persistent applications.
USA Today wrote that while some companies have profitable operations, they may not have anything to put up as collateral, making banks unwilling to extend commercial loans. Instead, these businesses can go online and find funding from similar sources or smaller dollar amounts to help them meet these goals. Unlike crowdfunding, entities don’t have to wait to meet goals and potentially lose out on their whole initiative, instead targeting online resources that guarantee lending.
Robert Abendschoen of SearchLightcomics.com told the source that he had sent out lending applications to nearly ten banks, all of which denied him because he owned no assets besides his inventory. Instead, he expanded his product line by asking online lenders for one-fifth of the needed amount, slowly enhancing his portfolio and repaying the funds in a cycle until he met his goal.
Managing Fees With Online Lenders
The one thing that companies need to be mindful of when working with an online lender as opposed to business banking with a local source is that fees can easily get out of control. Being sure to repay quickly and keep overall balances at a minimum is the key to financial planning with alternative funding sources.