5 Tactics For Businesses That Can't Get Approved For Bank Loans
As the old adage goes, you have to spend money to make money. This sentiment is particularly true when you're trying to start a business, but you can't spend money if you don't have it.
Businesses need funding to get off the ground, but it can be hard to qualify for business bank loans. Here are five tactics to try if you need business funding but can't qualify for a business loan.
1. Borrow money from friends and family.
Talk with your friends and family about a loan. The bank doesn't know you personally, and it bases its decision on your credit score or history of business profits. Your friends and relatives, in contrast, may be willing to look at other factors.
They may understand your passion for your business, and they can see that your dream is likely to succeed. To improve your chances of success, be serious when you ask them for help.
Show them your current numbers and projections about how their loan can help you succeed. Also, have an established plan for repaying them.
2. Sell shares in your business.
If you can't get loans from friends, family members, or banks, consider selling shares in your business. You will need to establish your business as a corporation, which involves some paperwork; but selling shares can be an effective way to pour capital into your business.
Then, the shareholders will own a share of your profits, and you may opt to pay them dividends. This will dilute your profits in the long term, but it may be the best option if you need funding right now.
3. Look for grants.
Grants are free money. You don't have to pay them back. Look for grants in your community or nationally.
There are all kinds of different grants. You may improve your chances of success if the grant is geared toward a specific industry, a certain type of business owner, or businesses in key areas.
4. Take out a personal loan or credit card.
You and your business are separate entities. If the business can't get a loan, you may want to try to take out a personal loan or credit card. Just make sure that you carefully track business and personal expenses so they don't get muddled together.
5. Establish your business credit.
Take some time to establish your business credit. Create a business credit profile by borrowing and repaying a very small amount of money. Talk with lenders to see what you can do to make your business look more creditworthy on paper.
Contact a business funding service to learn more.