Every Way to Get Small Business Loans in 2024 [startups & new businesses included]

Summary

In this video, Quran from Life Accounting educates viewers on the various business loan types available for small businesses, including SBA loans, conventional bank loans, and alternative lender options. He discusses loan eligibility, necessary documents, and strategies for comparing loans to secure the best terms. The video is a comprehensive guide for business owners seeking financial assistance, emphasizing the importance of understanding different loan options and the factors that influence their suitability.

Takeaways

• 🏦 There are three main types of lenders for small business loans: SBA, conventional banks, and alternative lenders.
• 📈 SBA loans offer benefits like guaranteed portions and easier qualifications but require more paperwork and have slower approval times.
• 🏢 Conventional bank loans have the best terms regarding interest rates and fees but are harder to qualify for, especially for new businesses.
• 🌐 Alternative lenders provide quick approvals and easy eligibility but often come with higher interest rates and fees, making them suitable for startups or businesses with lower revenues.
• 💼 Bank loans are ideal for established businesses with good credit, offering the best interest rates but requiring strict qualifications.
• 💵 SBA's 7(a) loans are versatile, offering up to $5 million for various business needs but require a good credit score and consistent revenues.
• 💲 Microloans are accessible for businesses with less revenue or credit, but they involve a longer process and require collateral and a personal guarantee.
• 🏗️ SBA's 504 loans are for purchasing commercial real estate or equipment, offering low interest rates but with a lengthy application process involving banks and CDCs.
• 📉 Term loans provide a lump sum with fixed repayments and are quick to approve but have higher interest rates and fees compared to other options.
• 🔄 A line of credit offers flexible access to funds up to a limit, with interest paid only on the amount drawn, but may come with costly fees and lower borrowing amounts.
• 📋 To apply for a loan, businesses need to provide documents like tax returns, income statements, balance sheets, bank statements, legal documents, and a business plan.
• 🏷️ Loan eligibility is determined by the 'Four Cs': Capital, Credit, Collateral, and Conditions, which assess the business's ability to repay, credit history, assets for securing the loan, and the purpose of the loan.

Q & A

What are the main reasons for a small business to consider getting a loan?

Small businesses may consider getting a loan for various reasons such as starting the business, working capital, cash flow, equipment purchases, or emergencies.

What are the three main types of lenders for small business loans?

The three main types of lenders for small business loans are the Small Business Administration (SBA), conventional banks, and alternative or online lenders.

What is the primary advantage of an SBA loan?

The primary advantage of an SBA loan is that the SBA partners with lenders to provide loans and guarantees 75 to 90 percent of the loan, resulting in better terms and easier qualifications for small businesses.

What are the typical downsides of getting a loan from a conventional bank?

The downsides of getting a loan from a conventional bank include strict qualification requirements and potentially higher interest rates and fees compared to SBA loans.

How do alternative lenders differ from traditional banks in terms of loan approval and funding speed?

Alternative lenders typically offer faster loan approvals, often within a few hours, and provide funds in less than a week, compared to the longer approval times of traditional banks.

What are the benefits and drawbacks of using alternative lenders for small business loans?

Benefits include quick approval and funding, easier eligibility requirements, and less restrictive rules for fund use. Drawbacks include higher interest rates and fees compared to other lenders.

What is a 7(a) loan and what are its main benefits and requirements?

A 7(a) loan is an SBA-backed loan program for up to $5 million, with terms up to 25 years. Benefits include multiple loan programs to fit different needs, while requirements include a minimum credit score of 690, two years in business, and consistent revenues.

What is a microloan and who is it best suited for?

A microloan is a small, short-term loan intended for small businesses and startups. It is best suited for businesses without large revenues or good credit, requiring a business plan, collateral, and a personal guarantee.

What is a term loan and how does it differ from other types of loans?

A term loan is a lump sum paid back in fixed increments over time. It differs from other loans by offering fast online approval and fund disbursement, but typically has higher interest rates and fees compared to conventional bank loans or SBA loans.

What are the key documents required for applying for a small business loan?

Key documents required for a small business loan application include personal and business tax returns, income statements, balance sheets, business and personal bank statements, business legal documents, and a business plan.

What are the '4 Cs' of loan eligibility and why are they important?

The '4 Cs' of loan eligibility are Capital, Credit, Collateral, and Conditions. They are important as they assess the borrower's ability to repay the loan, credit history, assets that can secure the loan, and the purpose of the loan, time in business, and industry.

How should one compare different loan options to determine the best fit for their business?

When comparing loan options, consider the interest rate and APR, whether the rate is fixed or variable, additional fees, loan amount, repayment terms, required collateral, and whether the loan is secured or unsecured.