It is true that the world economy is just finding its feet again and trying to regain normalcy. These times are hard on those small businesses which need finance for continuing operations. Banks seem to be holding fast to their funds and credit is scarce for small businesses. But if you do need the capital and you are ready to embark on a hunt for capital you would be doing the right thing. With a lot of persistence and a creative approach, there is every hope that you will be able to raise the finance you need. Here is some advice on how to get started.
Look out for microloans
If you are a small business with a reasonably good credit history, you stand a fair chance of obtaining a small line of credit, usually, a limited amount from micro- lenders, even if the big banks have refused to lend to you.
Make use of your assets
Ever since banks have started pulling back their line of credit to small businesses, the popularity of asset based lending has increased by leaps and bounds. At most of the small banks you can secure a line of credit against receivables in which the bank lends you 85 percent of your receivables, and then credits the remaining 15 percent after your customer has made his payment in full. You will be paying about 1.5 to 3 points over the prime interest but since small businesses with modest earnings are not considered to have a lot of credit worthiness, it is what you can expect and obtain in the present circumstances.
Search online for peer-to-peer networks
For small businesses which need small amounts of working capital, there are peer-to-peer networks, which connect lenders and borrowers online. This is a new concept, but one that has a great potential since it is one option for the small business owner to try to raise funds. There are quite a few sites like prosper.com, lendingclub.com and loanio.com which enable small businesses and entrepreneurs to search for lenders and borrow amounts with three-year repayment terms at varying rates of interest.
Try your luck with the big banks
If your business has a reasonably good credit history and your business is profitable and has bright earning potential, you could do a survey of the banks that are small-business friendly which are doing good business and have promising prospects of lending. It is necessary to look into your financial records before approaching the bank. They have to be clean and above board. Your balance sheet should necessarily reflect your claims of potential growth and your numbers should be realistic.
Make your vendors you allies
You may not realise it fully, but your vendors are also a good source of credit. Most often it is your vendors who rise up to the occasion and are motivated to see that their customers’ business prospers and make profits since it would generate profits for them too. Your vendors can keep your business running by working out a payment structure which will enable your business to survive during a difficult period. Just like all other lenders, if you can show your vendors how profitable your business can be…they will surely oblige.
The article speaks of finding finance for small businesses. Banks seem to be holding fast to their funds and credit is scarce for small businesses. But if you do need the capital and you are ready to embark on a hunt for capital you would be doing the right thing. With a lot of persistence and a creative approach, there is every hope that you will be able to raise the finance you need