<br/> <br/> The idea that alternatives accessible for small business owners fall to selections between traditional financing, factoring companies , or venture capital is the wrong way to look at funding small business efforts. Even if the business depends only on debt financing to fuel its capital needs, business owners should look at the financing options accessible to them as a 'portfolio' of investment options.<br/><br/>One size does not fit all-- two or three sizes don't fit all either.<br/><br/><br/><br/><br/>Most of the Main Street businesses we refer to here will sustain growth and fund working capital with borrowed money or cash flow. The good news is, there are a load of choices available. Sadly, many small business owners examine the options as an either/or choice to be made. I think it makes sense to take a look at financing alternatives that are appropriate to different situations and how they might work together to help small business owners find the capital they need.<br/><br/> As an example, a good relationship with a community banker is crucial to the long-term health of a small business. That's not to say an SBA loan or some other traditional loan is the most ideal and only solution to the financing needs of the local dry cleaner or restaurant. Yes, interest rates are lower on a traditional fixed-term loan, but how fast a small business owner can access capital could be challenging with a term loan that takes weeks or months to fund if the small business owner needs the cash today.<br/><br/>And, the major obstacle is that many Main Street business owners don't have the credit, time in business, or revenues to meet traditional loan requirements. This is especially distressing for early or idea-phase startups. No history, no product, and no revenues usually mean no loan.<br/><br/>For a business owner who doesn't meet the underwriting qualifications of a traditional lender, alternative loan products can really help establish credit while letting the borrower to fill his or her short-term capital requirements. Factoring companies have less stringent lending guidelines than does the local bank-- but that comes with higher interest rates. As a result of higher interest rates, small business owners should check out repayment terms of a few months rather than a couple of years. Although receivable financing may be a highly effective resource when used correctly, it can also be very costly if misused.<br/><br/>Many small business owners who do get low-interest term loans still resort alternative financing techniques as a short-term bridge to a traditional term loan while they anticipate a traditional loan to become funded. If the business owner is trying to take advantage of an opportunity and can't an SBA or other traditional loan to close, the extra interest they pay over the two or three months they wait is well worth almost instant accessibility to capital offered by alternative financing .<br/><br/><br/><br/><br/>When looking at the numerous funding options readily available for small business owners, some of the questions that should be asked include:.<br/>1. What is the range of terms available?<br/>2. Are there any upfront costs?<br/>3. What is the minimum credit score required in order to get the loan?<br/>4. Just what are the underwriting needs besides my credit score?<br/>5. Precisely how rapidly can the loan be funded?<br/>6. Do I really need the cash now, or can I sit tight?<br/>7. Will I have the ability to make regular and timely payments?<br/>A small business owner should deal with his or her credit score like a priceless asset. Sometimes short-term financial judgments have long-term outcomes. For instance; a business owner that had a good business idea but no collateral, no income, and no credit was distressed and disturbed that lenders weren't interested in his idea and weren't gushing themselves to give him money. He wasn't interested in bootstrapping because it would cause him to scale back his growth plans. It wasn't what he wanted to hear, but bootstrapping his idea was the only real choice available and the approach I suggested. Many exceptionally successful companies were started by an entrepreneur who bootstrapped his way to the top.<br/><br/> Just what's the best strategy for your Main Street business? There are certainly a lot more than one or even a mixture of many alternatives-- once size does not fit everything.