Before applying for small business financing, it’s important to know and understand the different types of financing available. There are different types of small business financing programs available to small business owners and they have different criteria for approval. Furthermore, they also differ in how you are required to pay back the funds. A startup business with no revenue and a existing business with $500,000 in annual revenue will qualify for different types of small business financing because they are at different stages in the business growth cycle. To understand what I mean, below are three examples of different types of small business financing and what it takes to qualify for them.
- Unsecured Business Lines of Credit – This type of small business financing works well for startups and established business owners. You don’t need collateral to qualify for unsecured business lines of credit or an existing business with revenue. All you need is a registered business and good personal credit. If you have a good personal credit history, LenCred can help you get up to $200,000 or more in unsecured business line of credit for your business.
- SBA Loans – This types of small business financing works well for startup and established business owners however, it is not as simple to obtain as unsecured business lines of credit. While you don’t need a perfect personal credit history to obtain an SBA loan, you will need a business plan along with supporting documentation such as bank statements and tax returns, etc. Depending on the industry and the amount you need to borrow, your business may need to be currently generating a certain amount of revenue.
- Merchant Cash Advances – This type of small business financing works well for established businesses that have been in business at least one year, generating at least $3,000 per month in revenue, and have a high amount of daily credit card sales and/or deposits. I typically only recommend this to business owners in industries that have a high amount of daily credit card sales and/or deposits (such as restaurants) because it requires daily payback and can be quite expensive if you don’t have consistent daily revenue.