One Florida SBDC at FIU consultant says only about 15 percent of the small businesses he sees are eligible for a traditional small business bank loan.
If you are in that elite group, great! For everyone else, there are options.
There are alternative financing options – yes, they are more expensive – or community based financing options. Sometimes SBDC consultants can help their clients with the issues holding them back from a traditional loan – for example, cash flow issues — so that they can reapply. Sometimes it is a matter of looking within to conserve cash – ie bootstrapping, says Julio Villiers, an SBDC at FIU consultant specializing in access to capital.
“At the end of the day if the client isn’t bankable at the moment, there are options. They may have equity in their home, some may have family friends, or savings they can tap, such as an old 401k.” said Villiers.
That’s called having skin in the game. “If you don’t trust what you are doing, how is a bank going to feel?” says Villiers.
He recommends looking into Miami Bayside Foundation, Accion and NLP, community organizations providing funding if your company meets various criteria. Miami Bayside Foundation, for instance, has awarded a total of more than $3.1 million to 71 minority owned businesses within the City of Miami, but a lot of companies don’t know about this resource.
SBDC Consultant Raju Mohandas says that companies who tell him they have tried everything are likely knocking on the same doors – banks and/or investors. “There are options in the alternative financing world,” he says.
Those include equipment loans, leasing companies, finance companies that will fund you based on credit cards, Accounts Receivables financing, PIO financing, project financing and companies that specialize in factoring.
“You are going to pay more for it, that’s obvious, but what happens is you have extra options,” he says. “It’s up to you to analyze whether the cost and added risk is worth it.”
For small businesses that can qualify for SBA or commercial bank loans, SBDC consultants can help with the documentation process.
MORE INFO: Read more about SBA loan programs here.
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