30 May Need Capital? Know Your Options.
A big challenge facing small businesses is getting financing, but the problem is often lack of information, not lack of supply. I have worked closely with small busiess owners for the last 5 years to help them find new avenues for capital they may not have known existed. Polls show that 80-90% of small business owners view access to capital as a big problem. Which means that it is a big problem.
While it is true that big banks approve just 2 out of 10 loan requests from small businesses, it is also true that small business owners have other, often better options for obtaining the financing they need at terms they can afford. For small businesses based in the Washington, DC metro area, those better options include:
Community Banks & Credit Unions: While their lending criteria is similar to that of big banks, they have more flexibility and can take a more individual approach, which translates to a much higher small business loan approval rate of 50%. Do some research and shop around.
Nonprofit Community Lenders: Also known as Community Development Financial Institutions or CDFIs, these lenders target their services to underserved businesses in low-income communities. They typically raise the money they lend through government grants, low-interest loans, private foundations, or banks looking to satisfy Community Reinvestment Act requirements, and they also administer special loan programs in partnership with the Federal Small Business Administration (SBA). Learn more about loans available through these five CDFIs based in the District of Columbia.
Online Lenders: In our fast-paced, tech-driven society, going online rather than going to a bank can be very appealing. The proliferation of online lending is not without its risks, though. It’s important to understand the different types of products available and the pricing structure before you accept an offer that could cost your business more than it can afford. Here’s a good primer on online lenders if you want to learn more about the pros and cons.
Crowdfunding: Online crowdfunding platforms have also gained popularity over the past several years. Some, like Kickstarter and Indiegogo, are rewards-based, while others like Crowdfunder and CircleUp offer financial rewards to investors. Kiva sets itself apart by offering borrowers 0% interest loans with no fees. Learn more about different crowdfunding platforms and what it takes to use them successfully.
If you are one of those small business owners who have found it difficult to get the financing you need, I hope that this article has led you to new money trees. Keep shaking them!