According to a survey from Fortune magazine, the self-reported reason for failure in almost 30% of cases is that the small business ran out of funding. Close to another 10% suffered from an inability to obtain funding in the first place.
Collectively, that means about 4 in 10 small businesses that fail do so because of small business funding issues. Having access to working capital for your business is essential, not only to get things off the ground, but to sustain momentum, growth, expansion, and fund day-to-day operations.
Often, it’s what sets early successes apart from early failures. But getting access to small business funding can be a major hurdle for many small businesses across all sectors.
Business loans are one popular funding method, but among the hardest to obtain. Strict lending requirements put in place on commercial banks following the financial crisis of the late 2000s have moved the bar even higher for qualifying for small business loans.
Absent a rich founder, venture capital investment, or access to business loans, small businesses can find themselves with a great product, great service, great employees – and no money to fund operations or bring those great ideas to fruition.
Fortunately, there are options for alternative small business loans – and alternatives to loans entirely – that are becoming more readily available.
Alternative lenders and different forms of small business funding may be the perfect solution for small businesses that have been rejected by banks and traditional lenders.
Even when banks say no, there are still options out there for intrepid entrepreneurs and companies who are willing to fight for their future.
Learn more below as we profile the small business funding options available from alternative business lenders, and how they can provide the lifeline of working capital and cash flow management that small business owners desperately need.
Why Banks Say No to Borrowers
First, it’s important to understand why banks say no to borrowers in the first place.
After all, if so many small businesses are having trouble accessing funds, it is surely incumbent on small business owners to research the topic and understand these struggles, so that they may better position their business to overcome them.
Unfortunately, it’s not that easy, as even well-meaning and well-managed businesses can have trouble accessing appropriate small business funding with banks and traditional lenders. In general, banks are very risk-averse with their lending habits.
They make a ton of money off of interest and fees lending to low-risk clients, and do quite well for themselves. Most banks and financial institutions employ a wide range of experts and actuaries to determine the risk threshold that they are willing to tolerate.
As such, banks and traditional lenders automatically reject clients that fall below that threshold. It pre-selects the group of people or businesses who can qualify for a loan to a small fraction of the total population.
Banks and traditional lenders tend to have very high thresholds, too, requiring exceptional credit scores, fairly large monthly revenue amounts, lengthy business history, and more in order to approve a business loan.
As mentioned above, these requirements have become even more strict in the wake of the financial crisis of the late 2000s.
Owing to the fact that commercial banks do more than just lend – they have savings and checking account deposits that are highly regulated – tighter lending requirements were put in place in order to protect the deposit-oriented operations.
Much of the financial crisis stemmed from excessive lending for mortgage loans to consumers who were extremely high-risk, or loans that were far in excess of the underlying fair market value of the property (due to the housing bubble and historic run of year-over-year price increases in housing across the US market).
So, naturally, greater oversight, less risk tolerance, and stricter requirements for lending of all types was the result.
For entrepreneurs and business owners seeking small business funding, that means that it’s now even more difficult to obtain business loans or other funds through a bank. The same holds true of many non-bank traditional lending institutions.
The exact impact of the financial crisis varies based on how a bank or lender is defined in law, and what other affiliated operations they maintain. But, in general, the trend has been less and less risk tolerance for loans.
Given that half of small businesses fail within 5 years, it’s understandable that they are seen as an unacceptable risk for many lenders.
Alternative Lenders for Small Business Funding
Alternative lenders are not banks or financial institutions, but private companies that focus on providing loans to individuals, small businesses, or both.
They don’t have the same regulatory requirements as commercial banks, and therefore don’t have such strict requirements on lending. They are free to set their own risk tolerance thresholds.
In terms of small business funding, alternative lenders often provide valuable business loans and other financing services that small businesses rely on.
It’s easier to qualify, with many alternative lenders having considerably lower minimum credit score requirements than traditional lenders and banks.
And, ideal for start-ups and new small business ventures, many of the credit and loan products that these alternative lenders offer have very minimal time-in-business or monthly revenue requirements.
The net result is that alternative lenders can provide much-needed small business funding to small businesses across all industries and sectors, even those that have just begun to operate, and help them get their business off the ground.
BizFly Funding Business Loans and Other Small Business Funding Options
BizFly Funding is one of these alternative non-bank lenders, focused on providing small business funding through a variety of loan and credit products.
As a trusted alternative lender, based in the United States, BizFly Funding can provide exceptional customer service, fast approvals, and flexible business loans and small business funding options to suit the needs of small businesses of all types and across all industries.
Specifically, BizFly Funding offers a comprehensive range of small business loans and other small business funding options. Each has its own ideal use cases, different qualification requirements, different limits, and may or may not be suitable for any given business.
To help small business owners choose the ideal small business loans or funding options for their business, we briefly highlight the offerings of BizFly Funding, and the details of each funding option below.
Of course, if you are a small business owner and looking for more information or help in choosing the small business funding option that is right for you, BizFly Funding is happy to help, with a customer service team and online application process that can get you pre-approved and respond to your questions and concerns within hours.
All of the small business loans offered by BizFly Funding are what is known as unsecured loans. That means there are no collateral requirements in order to obtain the loan.
For small business owners, this form of small business loan reduces the financial risk and exposure, should the business encounter trouble or default on the loan.
In traditional collateral-backed, or secured loans, small business owners often end up putting up their property, home, vehicles, equipment, or other assets as a guarantee of repayment for the loan.
This reduces the risk to the lender, but means a default on the loan can end up costing the business owner a great deal. Often, the book value of these assets that are used to calculate collateral are far less than their true market value.
This means a default on the loan can end up costing thousands or hundreds of thousands more than the principal and interest outstanding.
By contrast an unsecured small business loan ensures that small business owners will never be on the hook for more than the value of the loan principal and interest. This presents a somewhat greater risk to the lender, which means somewhat higher interest rates on the loan.
But, it provides a much greater peace of mind for business owners, and gives them a bit more freedom to borrow the funds they need freely, without worrying about ending up car less, homeless, or absent equipment and assets the business needs should they default on the business loan.
This kind of small business funding option is a good all-around choice to fund longer-term business needs, including operations, payroll, strategic expansion or growth, specific projects, investment, capital expenses in people, plant, and equipment, and similar activities.
Unsecured small business loan details:
- Typical loan term of 2 to 36 months
- Available loan amounts from $5K to $1M
- Loan rates of 9% to 45%
- Minimum requirements of a 500 credit score, 6 months in business, and $10,000 minimum monthly revenue (with higher requirements for larger loan amounts)
Short-term small business loans are a type of small business funding that is similar to general small business loans, but typically are meant for a much shorter duration. Repayment is often on a daily or weekly basis, rather than monthly with traditional business loans.
The loan term is typically 18 months or less, though terms up to 2 years are available. Like the other fast business loans available from BizFly Funding, short-term small business loans are unsecured, meaning there are no collateral requirements.
This kind of loan does offer somewhat higher risk for the lender, however, and as such, there are somewhat more strict lending requirements than many of the other types of loan products available.
Consequently, this is one of the more difficult loans to qualify for at BizFly Funding and other alternative lenders. At the same time, the requirements are still much more accessible than many of the traditional bank loans that are available today.
The short-term nature of this kind of small business funding means that it is well-suited to relatively short-term tasks or one-off expenses.
Improving working capital with a short-term small business loan can allow you to have a buffer or safety net in your expenses, that’s especially important if you have a long period of time between your capital outlays and accounts receivable.
Purchasing inventory/purchase order financing, adding shifts, labor, or equipment, and undertaking new marketing efforts to grow your business are all great uses for short-term small business loans.
Short-term small business loan details:
- Typical loan term of 6 to 24 months
- Available loan amounts from $15K to $1M
- Loan rates of 9% to 45%
- Minimum requirements of a 600 credit score, 1 year in business, and $10,000 minimum monthly revenue (with higher requirements for larger loan amounts)
While many small business owners don’t typically seek out capital in order to help manage existing debt, it’s an option that is worth considering. Debt service can chew up a lot of your revenue, and mismanagement of debt can often spell doom for many small businesses.
Naturally, if there is an option where you can manage your debt and end up paying out less money overall in interest and fees, it’s worth pursuing.
Debt consolidation loans from BizFly Funding can be a perfect vehicle to help pay down debt and save money over the life of existing loans or credit products.
Debt consolidation is a process by which individuals or businesses can consolidate multiple debts – loans, lines of credit, credit cards, and similar – from multiple servicers into a single loan from a single servicer.
In many cases, debt consolidation loans not only simplify the servicing process, and cost less in monthly/quarterly/annual service fees, but they can save money by offering lower interest rates than on existing debt.
For example, credit cards typically charge 18-24% or more APR on the outstanding balance. A loan, even if it only offers an 8% lower interest rate, say 10% instead of 18%, on a balance of $100,000 over 3 years, can save you some $14,000.
Then, you can put that money to good use for your small business funding needs. Every business’ debt situation and financials are different, and need to be considered on an individual basis in order to provide the optimal debt consolidation loan solution.
So, there are no clear-cut requirements for debt consolidation help from BizFly Funding.
Instead, small business owners looking to improve their financial situation with debt consolidation are encouraged to contact BizFly Funding directly, either by phone or through the online application process, so that one of our customer service specialists can review your information and talk to you about your needs.
New small businesses often may have a limited credit history. Even businesses that have been operational for a while may have encountered financial struggles.
As a result, a limited or bad credit score can plague many small businesses, and put much-needed small business funding out of reach. BizFly Funding understands that even the best-run businesses can end up with a less-than-perfect credit score.
We don’t believe you should be dogged by that credit score, or defined solely based on a number. If you have sufficient revenue, business history, and financial stability, it’s entirely possible to get a business loan even with bad credit.
What’s more, a small business loan from BizFly Funding can help you improve your credit score further. Successfully taking out and repaying a business loan will improve your credit score.
Bad credit business loans are ideal for those with less-than-perfect credit, who are looking to improve their credit score, pay off debt, handle bills and expenses so that they don’t negatively impact your credit score further, and paying for unexpected bills that are “musts”, like repairs for equipment or payroll expenses to keep the business running.
Bad credit business loan details:
- Typical loan term of 2 to 18+ months
- Available loan amounts from $5K to $1M
- Loan rates of 12% to 45%
- Minimum requirements of a 500 credit score, 2 months in business, and $8,000 minimum monthly revenue (with higher requirements for larger loan amounts)
Women entrepreneurs and women-owned businesses are a traditionally underserved market. While women make up some 30% of small business owners, they find it disproportionately harder to gain access to capital.
Discrimination plays a role, as does subtle institutional bias (such as the pay disparity between women and men, statistically lower credit scores for women, and overall average net worth that is less than those of their male counterparts).
Many of the causes of these discrepancies are societal and will not be solved overnight. But alternative lenders like BizFly Funding have made great efforts to make credit and loans for women-owned businesses more accessible and easier to qualify for.
Righting the wrongs of the past, and the discrimination perpetuated by the traditional lending and finance industry is something we’re passionate about at BizFly Funding.
By providing special attention to this important area of small business funding, we hope that more women-owned businesses can flourish and thrive.
The success or failure of a business should hinge on the quality of their ideas, products and services, and management – and not be a function of the gender of their owners, operators, or employees.
Small business loans for women help to level the playing field by providing capital that has traditionally been out of reach of female entrepreneurs for no reason other than gender.
Small business loans for women details:
- Typical loan term of 2 to 36 months
- Available loan amounts from $10K to $1M
- Loan rates of 12% to 45%
- Minimum requirements of a 500 credit score, 2 months in business, and $8,000 minimum monthly revenue (with higher requirements for larger loan amounts)
A business line of credit is a small business funding option that’s somewhat different than a business loan. It works similar to a credit card account, in that you are approved for a certain credit limit.
You can then borrow against the line of credit, getting cash payments, as you see fit, up to the limit. You pay interest only on the outstanding balance, and repay it over time.
You can then borrow again and again, as often as you need, provided you are under the limit and continue to make payments. This kind of revolving working capital facility helps businesses manage their cash flow.
It’s ideally suited for covering operating expenses, smoothing the peaks and valleys between accounts payable and accounts receivable, managing and purchasing inventory, seasonal or variable income businesses, and providing a safety net or buffer for small business owners to better manage their business’ capital outlays.
Since it’s not a loan, there is no fixed repayment term or duration. And, since you only borrow what you need, you’re not stuck with interest payments on a loan that may have been in excess of your true needs. It’s a cost-effective and flexible option that is ideal for many different kinds of businesses.
Because much of the use of this kind of small business funding is at the discretion of the small business owner, and the interest rates are considerably lower, the qualification requirements are somewhat higher with regard to credit score and revenue than other business loan products that we offer at BizFly Funding.
Business line of credit details:
- Available loan amounts from $5K to $250K
- Loan rates of 5% to 10%
- Minimum requirements of a 650 credit score, 6 months in business, and $10,000 minimum monthly revenue (with higher requirements for larger loan amounts)
The final type of small business funding we offer is known as a merchant cash advance, sometimes called an MCA loan. It is similar to a loan in that you get funds up-front as a lump sum payment. It differs, however, in the method of repayment.
Merchant cash advances are repaid automatically, by deducting a percentage of your future credit or debit card sales and transferring them to the lender. This usually includes the principal amount of the advance, plus interest at an agreed-upon rate (called a factor rate).
While this option is more costly in terms of the interest/factor rate than some other business loan products, it can be a great choice for businesses that do a lot of business via credit or debit card sales. The repayment term is variable, as the repayment amount is based on actual sales.
So, when business is slow, repayments are slow. When business picks up, repayments pick up. Business owners are never stuck with a bill due on the MCA loan that is out of proportion with current sales, so it helps financially-strapped businesses avoid defaulting.
It’s also incredibly convenient, with automated deductions from credit or debit card sales, meaning business owners don’t need to worry about making payments on a certain calendar date or managing their account.
It’s one less thing to worry about, letting business owners focus on running their business instead of doing paperwork.
Merchant cash advance/MCA loan details:
- Typical loan term of 2 to 12 months, variable based on sales
- Available loan amounts from $8K to $250K
- Loan rates of 24% to 49%
- Minimum requirements of a 500 credit score, 2 months in business, and $8,000 minimum monthly revenue (with higher requirements for larger loan amounts)
At BizFly Funding, we’re committed to serving the small business funding needs of businesses across all market sectors and industries.
No matter what area you operate in, we’re happy to help you obtain the working capital for your business and strategic capital you need to grow, expand, operate, and survive.
As discussed above, some of our products are more well-suited to certain sectors than others, but we’re sure to have a business loan or other credit or loan option that’s right for you.
Below are just some of the sectors that we’ve had extensive experience in serving. Learn more about the financial products and services that have benefited our clients in these diverse industries through the links below.
The Advantages of Choosing BizFly Funding for Your Small Business Funding Needs
BizFly Funding offers this full range of small business funding options, but that is hardly the only benefit to choosing BizFly Funding.
Numerous and varied options are great, after all, but meaningful small business funding needs to come with quality, customer service, and affordable rates. BizFly Funding offers all this and more.
First, applying for business loans or other credit products from BizFly Funding is both fast and easy. The application can be completed and submitted online.
Within hours, one of our customer service team members will be in touch, providing fast approval, pre-approval, or answering any questions or concerns you may have.
As mentioned above, the lending requirements at BizFly Funding are much more easily met than with traditional lenders or banks. This means more businesses can qualify for small business funding from BizFly Funding.
Even if you’re been turned down by a bank already, have bad credit, or have limited time in business, don’t despair! Check the qualifications for a small business loan or other product from BizFly Funding, apply, and you can very well be approved.
Our goal is to offer small business funding to as many businesses as possible, and as such we have a fairly high tolerance for risk. Once you’re ready to get funded with your chosen small business loan or funding product, you’ll be amazed at how fast everything happens.
The vast majority of our customers receive their loan funds, cash advance, or line of credit within 1 business day following a funding request and signing of the loan agreement
BizFly Funding offers exceptional customer service over the life of your loan as well. We’re available by phone or e-mail during normal business hours in the US, and our customer service team is top-notch.
They’re always eager to answer any questions about your loan, and help you with any issues you may encounter. We aim to make the lending process, repayment process, and everything associated with it as easy and straightforward as possible.
We know as a small business owner that you have a lot on your mind, and a lot to do. Your time is valuable. Focus on running your business, with funding from BizFly Funding, and don’t get bogged down with lengthy loan applications, paperwork, visits to the bank or anything else.
To learn more about BizFly Funding, please explore our website, blog, and FAQ sections. Then, be sure to apply online for pre-approval or approval, or reach out to us via our contact page with any questions or concerns you may have.
We’re here to help you with all of your small business funding needs, and hope to provide you the capital you need to turn your business into a success!
