The ramifications of the financial free-fall that began in September are likely to last for some time. And during that time, banks will continue to be cautious about lending money, which could be a problem for small-business owners.
But according to money.cnn.com, there are some alternative sources you can turn to for financing.
For example, microlenders (lenders who specialize in small loans for small businesses) can help if you have imperfect credit. Although the amount of money they loan is small (typically less than $5,000), some will loan as much as $25,000. However, they can be difficult to find.
John Arensmeyer, executive director of the Small Business Majority, a lobbying group, told money.cnn.com: "Microlending is limited in the U.S. compared to other countries."
Another option, which you may be loathe to consider, is friends and family. Because such loans typically are without the legal documents that accompany traditional loans, they can be easier and faster to secure. But it will be difficult to avoid the inevitable awkwardness that will result if you fail to repay the loan in the agreed-upon timeframe.
Factoring also can help. Factoring involves selling your accounts receivables to a factoring company, which will pay you a percentage of the money and later collect payments from your customers. Most factoring companies charge about 1.5 percent of the financed receivables. The downside is factoring isn't protected against delinquent payments, so if your customers don't pay, you're on the line to reimburse the factoring company. Also, because the factoring company will "own" your receivables, you cannot use them as collateral when trying to secure a bank loan.
Credit unions can provide financing, too, and usually are a bit easier to work with than traditional banks because account holders are partial owners of the institution.
Although these financial services are not the only options, they are a start. At least there are options in such a grim economic environment.
Ambika Puniani Bailey is editor of Professional Roofing and NRCA's senior director of communications.
COMMENTS
Be the first to comment. Please log in to leave a comment.