After two rounds of the Paycheck Protection Program (PPP) Loan, many small businesses are assessing the funding and lending landscape. It’s so important to think about outside funding as a way to boost your business and its outlook in 2022 – but it’s equally important to weigh each option prior to jumping in.
Thinking Outside the Brick-and-Mortar Bank for Traditional Loans
Oftentimes when we think of loans, instant images of meeting face-to-face with a loan officer at a bank come to mind. These days, it’s rare that any decision is made locally at the big banks. Think about reaching out to community banks or even credit unions. These financial institutions are often still FDIC-backed but may be more willing to lend during the current economic climate. Ask about how they handled PPP loans to find out how agile and adaptable they were during the pandemic. Many business owners were thankful to have the help of their bank in applying for and securing loans.
Short-Term Lending & Equipment Financing
Many institutions will offer small businesses short-term loans which can help you fund short-term goals. The underwriting process is generally less stringent and there are even some online providers of this type of capital with easy processes for applications. Equipment financing can also be a way to use assets as collateral to secure a loan – although beware of high interest rates and do not choose your equipment or technology based solely on loan terms.
Working Capital Loans, Microloans or Other Cash Advances
These types of loans are often the easiest to get but can also carry risks. Cash advances against credit cards or business lines of credit often carry higher interest rates due to the risks taken on by the financial institution. Think about how you will pay back these funding options prior.
This is a go-to funding source for many startups. Because it is considered a risky investment opportunity, this is best for new businesses that are growing – and investors will expect a good return on investment. Expect to have to scale quickly to get the investors back their capital.
If flexibility is what you seek, and if you like the idea of outside expertise giving your business a boost – a family office may be the right choice for you. Family offices generally manage the investments of high net worth individuals and have the flexibility to invest in multiple options that they feel they can add value to. In the case of Scandia Partners and Scandia Family, we help our partners achieve a high standard of excellence – with monetary returns being a key but not sole goal of the investment.
If you’d like to learn more about investment options for 2022, read our past blog about the types of startup funding for new businesses at this link.