Options for Small Business Loans Beyond PPP
Beyond the Paycheck Protection Program and the Small Business Administration, businesses need money. But what if you can’t get a PPP loan? For example, if you own a cannabis business, a casino or a racetrack, you’re out of luck. You might even find, as you look through all of the requirements for PPP loan forgiveness, that you don’t want to bother in the first place.
Now, the next iteration of the program is tied up in Congress, but your business still needs money. What do you do? You look elsewhere for a loan. Here's where to start.
Many business owners look to their bank or credit union first, but check out alternative lenders like Kabbage. Often, these lenders have less stringent qualifications, so a bad personal credit score isn’t necessarily a handicap. However, their rates may be higher than standard small business loan interest rates from a bank or credit union.
Working with a bank or a credit union
With a more conventional lender, you might get better small business loan rates, but it’s harder to qualify. Here are some tips for qualifying.
Working with a bank means assuring business fundability. Fundability is the ability of your business to get funding. Some of these elements are under the control of you, the business owner. It makes sense to do everything possible to take away easy reasons for lenders to say no.
Your business has listings everywhere. Online, it’s your website, but it’s also Yelp, Google, the Better Business Bureau and more. Don’t just check for spelling errors and correct information. You must also keep your information consistent from place to place. Make sure that if you write, say, Limited on Yelp, then don’t just write Ltd. on your website. Make sure you use the term Limited on your website so the listings match.
Why is matching so vital? Because lenders won’t stop to consider all the ways your business could possibly be listed. If they don’t find what they want fast, then lenders will consider it to be fraud. As a result, your application will be denied even before you get started.
If you haven't already, it’s time to buy your own domain from a web hosting company. You can often get a package where email is included or inexpensive. You can always have your domain email forward to your provider of choice, like Gmail. An email address like firstname.lastname@example.org and a website like www.website.com go a long way towards assuring a lender your business is not just a hobby.
Professionalism also means getting an EIN from the IRS and a DUNS from Dun & Bradstreet. Businesses have these identifying numbers; hobbies don’t. Professionalism also means incorporating or at least using a DBA. An added bonus of incorporating is shielding yourself and your personal assets from many types of corporate liability.
Licenses and continued training
Many industries demand some form of licensing. In some instances, the industry also requires continuing education. Often, the Secretary of State’s office has this information.
Time in business
Although you have no control over the passage of time, you do have control over when your business’s start date is. What is the starting date of your business? For a corporation, it will be the incorporation date. Even if your business isn’t making money yet, you can always incorporate fast. Then, while building your business, the clock for time in business will be ticking.
Yet fundability is not the only way to make your business more attractive to lenders.
What lenders are looking for
Lenders have individual requirements, but some prerequisites are universal.
An industry they know
Not every lender is a generalist. Working with a lender specializing in your industry will help, as they know what you need. These lenders can be local or online. Run a search on "banks that loan to ___." Fill in the blank with the name of your industry. You can find funding for everything from dog training to welders.
A business they know
That having been said, if you’re already a customer on the personal side, a bank can easily look up your records. If they feel you manage your accounts well, then that will be a positive for you.
Good account management
Good account management for a business or an individual means consistent deposits. It means not overdrawing your account and writing checks for insufficient funds. It means keeping a minimum balance — often $10,000 or more is best. A positive cash flow, where you add more money than you subtract, is also key. And don't forget, responsibility and professionalism will go a long way in turning a "no" into a "yes."'