Best banks for small business loans
Written by: brittanybritney
How many good ideas have been wasted because there was no money to put them into practice? Getting credit for business is a difficult task, but fortunately there are several alternatives to getting the finance needed for your project. With vision, competence and planning, you find ways to make your business viable without resorting to the bank.
Control the financial with an integrated system for your company
Bank lending may seem like the most obvious option to get credit for companies. But it is worth considering other possibilities before because, by borrowing money, you will pay considerable value in interest only . It’s how you happen to have a new paid partner: the bank.
If there is no organization to pay the installments on time, get the snowball of interest, which could lead to your company going bankrupt. Not to mention that access to credit can be complicated because a series of guarantees will be required.
Business credit: alternatives to banks
To get funding for your project from outside sources, you need to understand that investors are not philanthropists, meaning they are not interested in doing charity, but in making your money pay. In other words, they will only invest in your company if they have a good return perspective . But each alternative works in a particular way. Understand some of them:
Own resources
The first business credit alternative is actually an exception on our list. It is the only financing option that does not require you to meet the investor’s requirements because the investor is you own. There is a term for this modality, in English: “bootstrapping” means creating an enterprise with its own resources , without resorting to external sources.
It’s very simple: you save money and, after putting enough together, invests in your project. The maximum risk is to lose what has been saved for a long time – but on the other hand, you will not owe anything to the bank and you will not have investors pursuing you.
Another danger, in the case of start-ups, is not to calculate the working capital needed to keep the business in operation until it starts to make a profit. So make sure you calculate a realistic investment amount before putting the project into practice, otherwise you’ll end up resorting to a bank, just what you were trying to avoid.
Venture Capital Funds
Venture capital funds also work by investing money and acquiring equity interest in the company in order to profit in the future with its growth. The difference is that the funds act in a structured way, are formed just for this and usually invest in companies with a solid foundation.
There are several funds that work in a specific area (projects related to the area of ​​sustainability, for example). When the goal is achieved and the company has grown, there is the divestment , when the fund sells its share and aims at other companies to invest the money.
Accelerators
Accelerators are private institutions that invest in promising startups. Generally, the beneficiaries are chosen in events that work as a competition, in which the best ideas are selected.
The interesting thing is that the concept of accelerating a startup does not only mean providing it with resources, but rather optimizing its management, guiding structural changes and mediating the contact with potential partners and investors.
Just like investment funds, the profit of the accelerators depends on the success of the company. That’s why the competitions to select startups are so rigorous, because it’s only worth investing in ideas with greater prospects of success.