When I started my first small business sixteen years ago, the idea of securing a loan through my local bank was a much more realistic and fairly simple option. At the time, like many business owners, I took a loan from the Bank of HELOC. I went to my mortgage lender and obtained a home equity line of credit (HELOC); it was a short process with fairly easy underwriting. Unfortunately, for most small business owners today, the Bank of HELOC is closed—many people still don’t have equity in their homes after the Terrible Recession, and some lost their homes entirely. What’s more, even if you have a home, it’s hard to get any type of loan using your home equity, including a traditional small business loan.
Financing is one of the most important challenges small business owners face. For example, you may need money for working capital or another reason. In that first business, I needed money to pay my employees while I waited for some of those first payments from my customers. You might also need funds to help expand your workspace or acquire new inventory.
The world has changed and running a small business is different today than it was when I was running my first business. Fortunately, although it can still be hard to get any sort of financing in some situations, there is a growing number of financing options for small business owners—in fact, more than ever before. Some products will feel familiar, but have changed radically due to how the Internet has made the small business loan process quicker and easier. Fintech companies—a new class of non-bank lenders that use online technology to make underwriting faster and much more simple—didn’t exist when I started my first business.
Now, many online lenders have emerged offering small business loans through a much simpler application process. With so many options and so many different rules for underwriting, it can be a terrible time sink for small business owners to understand and shop for their best option. The New York Federal Reserve recently surveyed small business owners and reported the average time spent searching and applying for financing is now 33 hours. That’s a heckuva lot of time that you could be working on your business. Or enjoying with your family, instead of looking for a small business loan.
This is why I’m so proud that SCORE and BusinessLoans.com, with support from OnDeck, have teamed up to provide a no-cost tool to help any small business owners assess what kind of financing products best fit their specific situation. The Fundability Tool asks you a few short questions and then identifies the financing options that may work best for you and your situation. Best of all, because it walks you through the basic requirements of each option, you can learn and understand what options may be available in the future as your business changes and grows.
It will also help identify where your application might have a hole or two, so you’ll know where you can improve your application to qualify for a loan at the bank, an SBA loan, an online business loan—or any of the other options next time.
The fundability tool is just one example of what we’re doing with BusinessLoans.com and OnDeck to make small business financing education more available at SCORE. For example, if you’d like to learn more about what’s changed in the world of small business lending, you should view this SCORE webinar too.
The Bank of HELOC may have closed for many of us, but the Bank of Hopes and Dreams can never close. I invite you to try the fundability tool and let us know if it helps you find financing for your business.