Business financing can give your small black-owned business the boost it needs to grow. There are many business financing options. However, not all are within the reach of small businesses because of their high eligibility requirements.
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Here are five small business financing options within your reach as an African American business owner.
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Bank Loans
Business loans from traditional financial institutions, such as credit unions and banks remain a popular way to borrow money. For well-qualified borrowers, the interest rates with transitional bank loans tend to be lower than those of online lenders.
However, it can be hard for some businesses to qualify for traditional bank loans, especially for startups without established business credit.
SBA Loans
Loans backed by the United States Small Business Administration (SBA) are one of the affordable ways to get funds for your business. With SBA loans, the US government guarantees a portion of the loan. That makes lenders more comfortable giving loans to people who might seem to be a risky investment otherwise.
SBA on its own doesn’t offer loans. Instead, you’ll need to get in touch with an SBA-approved lender to apply. However, like traditional financial institutions, you may need to pass through several screening processes to qualify for this type of small business financing option.
If you can qualify, your business may be able to borrow up to $5 million. Repayment terms can be as long as 25 years with some SBA loans. And you might also get funding with a down payment as low as 10% of the loan amount.
Online Loans
Gone are the days of having to visit a traditional financial institution to take a business loan. Today, it’s easier to find Online lenders that offer business loans that you can apply for in the comfort of your office or home.
Repayment terms, loan limits, fees and interest rates can vary widely depending on the loan type and the online lenders you work with. You can use an online loan financing option to cover many expenses, including debt consolidation, expansion costs, working capital and buying of equipment and inventory.
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Small Business Grants
Small business grants are funding options that can be attractive to any black small business owner. The main appeal of small business grants is the fact that you don’t need to pay them back and you don’t have to give out a portion of your business equity to secure funding. Grants are in essence free funds.
The only downside is you’re likely to face strong competition when you apply for grants. Generally, grants tend to be a long shot when it comes to small business financing options, but they’re hard to beat if you can qualify. Check out these books on Amazon to learn more about small business grant.
Business Credit Card
Business credit is another flexible way to get financing and build business credit. This type of financing is easier to qualify for, especially if you have a good credit score of at least 670. For this single reason, you can use this funding option to establish business credit.
Of course, interest rates on credit cards can be higher, even for well-qualified borrowers. Although, many factors influence business credit card interest, including your personal credit score. Here are guides on Amazon that can teach you how to improve your business credit score.
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Credit Union Financing
Like traditional banks, Credit Unions offer competitive rates, and their loans are SBA-backed. Plus, over the years, they have worked to increase their small business loan offers. According to the data the Federal Reserve released in October 2022, credit union loans to small businesses increased by more than 50% between 2017 and 2021.
The unions provide many financing options, including business credit cards, traditional term loans, and lines of credit. In most cases, you’ll need to be a member to qualify for a credit union loan.
If you’re starting a new business it’s essential to explore various funding options. Doing this will help you to secure funding for your business with ease. Get these guides on Amazon to learn more about small business financing options.
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