Thinking about getting a small business loan?

Okay, so. First of all, I want to say that I never, ever recommend going into debt. It’s NOT a fun place to be, but with that being said, I do understand that sometimes it’s necessary. Small business loans are something we get asked about a lot..

Now, I remember about 25 years ago I was told that banks won’t lend to startups and I remember thinking that was just crazy. I mean, they’re banks – isn’t that their sole purpose? But I’ll tell you, with all of my years working as an entrepreneur and working with banks, I’ve found that this is an absolute truth. Banks do not like to lend to start-ups, or really small businesses in general. Banks are only going to loan you the amount of money that you already have – so if you have $10 thousand dollars, they may lend you $10 thousand dollars. If you have $50 thousand dollars, they may lend you $50 thousand dollars. 

I know what you’re thinking… that’s ridiculous, right? Why would you ask for $10 thousand if you had $10 thousand? Well, this may be obvious, but maybe you need $20 thousand. And the banks are just looking for collateral. Banks just don’t want to take the risk. 

“Quick to borrow is always slow to pay.” 

Now, if you’re a start-up, your books don’t look great just yet, and you need money right now, well you’re in luck because right now is the best time to get money. There are a lot of ways to get money for those who have been affected by covid so I would definitely start there. 

Here are a few places to start looking:

1. SBA 
2. Chamber of Commerce
3. Google grants for your state 
4. Your county website for open grants/small business loan programs
5. Your Town website for open grants/small business loan programs

I’m leaning back in my chair right now pushing my glasses back up my nose, and I’m telling you, there is a lot of money out there! I’ve personally never seen it so available to small business owners before – super exciting! 

Now …  for the lean in. If you’ve exhausted all of those resources, or you’ve already received the funds and used them, you may have to look at some fundamental money issues, but if you don’t think so, just try again – look for a low-interest 30-year fixed loan or even a grant – they’re out there. 

With grants, you may have to prove how you’ll use the funds and really keep your books in tip-top shape, so that they can’t come in and take the money back. I’ve actually never seen so many grants available right now. 

So that’s all well and good.

Now.

Conventional lending is almost impossible unless you have a successful, profitable business with a beautiful set of books at the ready. Some banks have a bigger appetite to loan to small businesses than others but a good relationship with your local bank can’t hurt. We’ve been wined and dined by quite a number of banks and learned a lot about what they look for, and how to refer our clients to them. Feel free to reach out to us on our Facebook page or e-mail us directly for more info. Our Profit First Lab is an excellent way to get your business started on the right foot and your books perfected. 

Types of small business loans available:

1. Fixed loans (longer-term/lower-interest – won’t hurt your cash flow too much).
2. Line of credit (shorter-term/needs to be well-managed).
3. High interest (Paypal/Shopify/Kabbage – similar to having a credit card – between 15-25% interest plus fees).
4. Loan Programs attached to credit card deposits (take a percentage of credit card sales – DESPERATION LOANS! Don’t do these – 35% to 40% and higher – YIKES!).
5. Using a business credit card (can completely crush businesses and may end in bankruptcy).

Obviously, your options are unique to you and your business, but I’ll leave you with this very important piece of advice:

No matter what plan you have to borrow, HAVE A PLAN to pay it off. This is vital.

This is THE most critical point I want to make – it will make whatever you choose far more manageable than jumping into any loan program without a plan and hoping for the best.

Want a checklist to help you make sure you’re checking off all the boxes in your search? Get it below! 👇