Commercial Loans for Small Businesses
Many businesses, large and small, rely on commercial loans to fuel growth or fund other business initiatives like purchasing equipment, buying inventory, or other day-to-day business activities.Fortunately, there are many options available today for the small business willing to look outside the bank and other traditional sources for commercial loans.
Many of the options that were once considered “alternative” are now considered mainstream and even the first choice for other small business owners just like you who are looking for a small business loan.
Traditional Commercial Loans
The local bank has traditionally been the first place most business owners look when they need a commercial loan. It makes sense; they have their business checking account, maybe a savings account, and possibly even a business credit card there. Unfortunately, it’s not uncommon for a business owner with a profitable business to get turned away at the local bank.
The banker may be looking for a fairly narrow borrower profile, though getting a loan guaranteed by the SBA can make it a bit easier for a small business to qualify for funding from the bank. Frequently, they are looking for businesses with annual revenues of $1 million or more, several years in business, collateral to secure a loan, a business owner with a personal credit score in the 700s, and larger loan amounts. A business owner who meets those criteria will likely have success at the local bank—provided a traditional bank loan makes sense for their business.
A Quick Approval and Funds in 24 to 48 Hours
Online lenders, like OnDeck, look at your business differently than many traditional lenders, like the local bank—and are a good alternative to a traditional bank loan in many cases. We consider dozens of data points to evaluate the health of your business and your business’ credit worthiness. In addition to your personal credit score and business credit profile, we look at your cash flow, your annual revenues, and other information to evaluate whether or not we’ll offer your business a loan. Looking at your business this way allows us to say “Yes” more often than the bank—and your loan application, in many cases, could be approved within an hour and often have your funds delivered in 24 to 48 hours.
What type of loan makes sense for your business?
Financing options to help you grow your business
If you’ve ever heard the adage, “It takes money to make money,” you must be a small business owner. Fortunately, there are more small business loan options available today than ever before—you just need to know where to look and what to look for. You don’t need to be a financing expert to build a successful business, but you do need to consider all the business loan options available to determine which one is best to meet your business need.
Unsecured Small Business Loans
An unsecured small business loan is simply a loan from a lender that does not require any form of collateral from a business or a business owner. This is based solely upon the creditworthiness of the applicant.
Many small business owners are interested in a loan for their business but don’t have the specific collateral a bank may require, such as specifically-identified real estate, inventory or other hard assets. Fortunately, there are lenders like OnDeck that do not require that their loans be secured by specific collateral, relying instead on a general lien on the assets of the business. These may be good options for many businesses.
Secured Small Business Loans
Banks generally prefer secured—rather than unsecured—business loans. Secured loans are loans that are backed with some sort of collateral like real estate, equipment, or other valuable business assets the bank can seize and sell if the loan is not repaid.
Banks (or other lenders that require specific collateral) commonly determine what they refer to as the loan-to-value ratio of your collateral based upon the nature of the asset. In other words, your banker may allow you to borrow against 75 percent of the value of appraised real estate or 60 percent to 80 percent of the value of what they call ready-to-go inventory. Because lenders might consider their loan-to-value ratios differently, you’ll need to ask any potential lender how they intend to set that value.
Small Business Loans for Different Industries
As a business owner, your needs may be industry-specific such as ordering kitchen supplies upfront or bridging cash flow while you wait for insurance reimbursement. At OnDeck, we understand and we offer tailored loan options (with multiple loan types, amounts, and repayment terms), so you can get a loan best suited for your industry and business. Here are some of the most common industries we work with and the small business financing options available to them.