What’s your small business up to these days?
Are you purchasing new inventory or hiring new employees?
Expanding your online presence with a beautiful new ecommerce website?
Opening a new brick-and-mortar location?
When you have a small business that’s ready to grow, you need to act fast. But that action, as a general rule, requires a good chunk of extra cash… something not every small business has on hand, even one that’s doing well.
So where are you supposed to get that money?
There are banks, of course, that offer traditional small business loans, but these are often only available to businesses that have been around for many years, have stellar credit, and are looking for large amounts of money (aka, you might get some funny looks if you say you just need an extra $4,000 to launch a new website).
Luckily, the online world has created a number of alternative funding platforms for small businesses that need a little extra moolah to grow.
Crowdfunding
Crowdfunding is one of the best options out there for new business owners, or entrepreneurs with a great idea that needs some cash to make it a reality.
From large-scale projects like Goldieblox or smaller, more targeted products like Michelle Nickolaisen’s Freelance Planner, crowdfunding offers you the opportunity to sell your new product and generate interest… before it even exists.
Crowdfunding sites like Kickstarter and Indiegogo work on a fairly straightforward principle: you convince your audience (which really consists of anyone you can reach) to invest in your idea in exchange for a specific reward.
Investments at different amounts result in different rewards. Someone who only contributes $5, for example, may just get a handwritten thank-you postcard or a pdf version of the final product. Someone who contributes $500 will get a lot more — like multiple products, bonus videos, and a personal Skype chat with the creator.
You set the amount you want to raise and the reward levels, and then you promote the heck out of your campaign.
If you meet or surpass your goal, you get the money and can start working. If you don’t meet your goal, all the money goes back to the investors, and you start over. Crowdfunding sites generally take a fee of 4-5% of the total money you raise, plus a processing fee.
The Bottom Line
If you are willing to put the time into marketing, then crowdfunding is a straightforward option that allows your audience to invest directly in your business.
Financial Companies
You may be able to turn to the company you already use to manage your accounts and make sales to find the financing you need.
Intuit’s Quickbooks Financing helps small businesses find loans based on their individual needs. If you already use Quickbooks to manage your company’s finances, you can input your information directly into their loan finder and compare options directly on the website to find the type of credit that best suits your needs. Like traditional lenders, Quickbooks Financing is best for companies with strong credit.
Or, if you all your sales happen through PayPal, you can try out PayPal Working Capital, which offers with loans from $1,000 to $85,000. (The maximum you can borrow is 15% of your yearly PayPal sales, so if only part of your business is through PayPal, the amount you can borrow is limited.) Your approval rating is based on your credit score and history of PayPal sales.
Repayments are deducted as a percentage of your daily PayPal sales. There’s no interest charged through PayPal, but PayPal does take a flat fee that is based on your sales and how large a percentage you choose to put towards repayment.
The Bottom Line
If you’re looking for a lender that you know and trust, turning towards the financial company you already use may be a good bet, especially if you have strong credit or booming sales.
Line of Credit Lenders
And then there are businesses that offer loans directly to small businesses, the same way banks do, at more accessible terms. These lines of credit are accessible to be drawn against at any time for the length of the loan.
Which brings us to Kabbage.
Kabbage is an alternative lender that provides loans directly to small businesses in need of extra capital. Once only available to online businesses, Kabbage now provides loans for brick-and-mortar stores as well. Any small business that has been around for at least a year and has over $50,000 a year in revenue can qualify for a loan.
So how does it all work?
Applying for a Small Business Loan from Kabbage
Applying for a loan from Kabbage is a shockingly simple process. Everything is done online, and unlike traditional lenders, Kabbage doesn’t just look at your credit history. They also take into account your banking, accounting, sales, and ecommerce data, all of which provides a much more comprehensive picture of your small business than a single number ever can.
When you fill out your online application, you link to any platforms where you have accounts (banks, PayPal, Etsy, Square, Ebay, Quickbooks… they are able to pull information from anywhere you need!) and uses that data to approve your loan.
The process, on average, takes a couple of days. And once you’re approved, you have instant access to your loan. They even have a specialized app to make using your money as easy as possible!
Terms of a Loan with Kabbage
If you are planning to pay back your loan quickly, Kabbage offers excellent terms.
Loan amounts range from $2,000 – $100,000, available either in six or twelve month term lengths.
The interest rate on Kabbage loans generally fall between 1% – 12% per month, with no additional draw fee. So each month, you pay of either 1/6 or 1/12 of the principal plus any interest you have accrued.
Once you are approved, your loan is generally available within a few days, and you can access the money as often as once per day.
(They also have an extremely helpful repayment calculator directly on their website so you can see exactly what your loan will cost you from day one.)
Kabbage’s Ratings and Reviews
Kabbage’s small business loans have made a serious splash in the business world, providing access to credit for thousands of small business owners who previously struggled to get financing from traditional lenders. And those thousands of small businesses have a lot of great things to say about the company:
[Screen shot overall ranking and individual reviews from:
http://www.merchantmaverick.com/reviews/kabbage-review/
https://www.trustpilot.com/review/www.kabbage.com
The Bottom Line
If you need a long-term loan or won’t be able to pay back the principal quickly, you’d probably be better advised to work with a bank. But need a short-term loan for a growing small businesses, Kabbage’s lending terms might be exactly what you need.
If you have a rocky credit history, want easy access to a line of credit, or don’t have time to wait for a complicated approval process, Kabbage can help your small business to grow and expand right now.
Find out more about…
… qualifying for a Kabbage loan.
… applying for a Kabbage loan.
… types of loans available from Kabbage.
Before You Borrow
Extra cash can do a lot to help grow your business. But no matter where you choose to find your funding, there’s one thing you absolutely must keep in mind before you beg, borrow, or brag your way to that cash infusion:
You need to have a plan before you begin.
If you’re borrowing from a traditional bank, you won’t get a loan if you can’t articulate what you’re going to do with the cash. But though alternative funding sources don’t often apply the same amount of pressure, you need to apply it to yourself.
Do you plan to hire one new employee or five?
Launch one new product in the next six months, or four new products in the next year?
Give your storefront a facelift or your website a brand new look?
Having a clearly articulated plan — even if you have to modify it a little along the way — will help you decide how much money you need and how to use it as wisely as possible. If necessary, work with an accountant or a business coach to come up with a financial strategy, especially if the funding source you choose comes with interest.
If you know where your money needs to go and have a plan for what it will do once it’s there, you will have set your small business up for success.
Disclosure: This post was sponsored by Kabbage, but I think it’s important to know about multiple alternative lending opportunities for your small business! I only promote companies and services that I believe can benefit you and your business, but you don’t have to just take my word for it. See what Forbes, Wired, and NerdWallet think of Kabbage too!
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