While it is true that the financial crash that happened back in 2008 certainly has made getting small business loans harder for the past several years, securing a loan to realize your dream of owning and operating your own business remains a very real possibility for savvy entrepreneurs. The competition for the loans out there has become fiercer, and accordingly, if you want to find funding for your business, you need to up your game. Let’s look at some ways this can be done:
Avoid Cyclical Businesses
Simply put – investors don’t like risky investment. Businesses that tend have their success follow economic up and downturns are not as easy to get funded right now. Things like cars and luxury goods are not going to look attractive to investors. So avoid a business in such commodities.
But what if your dream business is a commodity such as these? What can you do? Use your own assets to guarantee the investment, find a co-signer that makes the investment less risky, and research your industry to see how others are handling this challenge.
Improve Your FICO Score
Your FICO score is your personal credit score. It can range anywhere from 300 – 850 and is dependent upon your credit history (payments, loans, debt level, etc.). Having a low FICO score can be one of the single most detrimental issues any entrepreneur currently faces in securing a loan.
Therefore, it’s in your best interest to do everything in your power to improve your personal credit score. This can be done by catching up on anything you are behind on, or simply starting a new credit card and ensuring you make your payments with it on time. The better your FICO score, the more likely a bank or other lender will be to loan you money.
Do More Research
This works in a couple of ways. First, now that the competition has become tougher, you need to be better prepared when you go in to ask for a loan. Do all the due diligence you can to ensure that you demonstrate you understand your market. Include a market analysis in your business plan, as well as projections of what you expect your cash flow to be.
Additionally, do more research outside the normal avenues for securing loans. Don’t go to that national bank – instead go to the local one, or the one that specializes in serving businesses in the industry you wish to work in. Both have vested interests that your business could bring bigger advantages to than national banks.
Stop Only Looking for Bank Loans
This is another big one – because banks aren’t giving out as many loans – non-traditional funding has started to emerge. Alternatives to a bank loan are more popular today than ever before and include options like micro-lending, online investor programs like Prosper.com and crowdfunding websites are seeing businesses find funding that would never get a traditional bank loan approved.
There are all kinds of options out there if a bank has turned down your loan, don’t give up if you’ve received a no. Keep at it until your dream is realized!
Still have questions?
Please call us for a free appointment with Miami business attorney Yoel Molina in our Miami office at 305-548-5020.