Will you have enough funds to take advantage of the economic upturn? Despite “green shoots” of economic recovery, one problem still persists for many small businesses: access to credit. For those businesses battered by the recession, cash can be hard to come by to fund day-to-day operations, let alone expansion. We’ve come up with a list of organizations who are lending, even in the downturn.
Banks & Credit Unions
- Best for: businesses and individuals with excellent credit and collateral.
- Rates: 5%-9%
- Summary: You may be surprised that banks still do have money to lend, and they are eager to do so for people who qualify. The key is in having good credit and some collateral. Banks will lend owners up to 10% of sales before they look for collateral. If you want more than that, be prepared to put up your house or other asset as collateral. Before you waste your time filling out the long application only to find out you don’t qualify, put together an executive summary about your business, detailing your loan request. Be specific. Outline how much you need, what you need the money for, and what you are offering as collateral. If you are a majority owner of the business, you should include a personal financial statement that lays out what you own and what you owe since ultimately you will be guaranteeing the loan. Then go to the banks and pre-screen them to see if you would meet their standards.
- Best for: Businesses and individuals who are borderline qualifiers for traditional lines/loans
- Rates: 5%-9%
- Summary: If your bank isn’t comfortable underwriting your loan on its own, you may qualify for any one of the SBA programs. You still apply through your bank, and the SBA will back up to 90% of your loan. Don’t be wooed into thinking this is easy money. Most banks look at the SBA as an insurance policy, and the application process can be complicated. If there is a mistake made in the application process, and the loan goes south, the SBA could back out of its obligation. There are different loans and line of credit programs, including a new program to lend up to $35K to meet current debt obligations.
On Deck Capital
- Best for: Retail shops with strong cash flow, in business for more than 1 year
- Rates: 18%-36%
- Summary: Unlike other lenders we feature here, On Deck Capital does not rely on the owner’s credit to make its decision. Instead, they look at the strength of the company’s cash flow. provides a quick infusion of cash into retail businesses that have strong cash flow. They extend loans up to $100,000 to retailers and arrange repayment by weekly draws from your checking account. This alternative may prove to be better than a credit card, but not by much given the steep rates. When you can’t qualify for traditional credit, OnDeck’s quick loan decisions and 7 day fund transfers may just be the cash boost you need to avoid a major crisis.
NJ Economic Development Authority
- Best for: Businesses who have been established for at least 1-2 years, good credit
- Rates: As low as 5% + application, closing, and commitment fees which can equal >2%
- Summary: The NJ Economic Development Authority, like the SBA, has a number of programs available for small to mid-sized businesses. Some are direct loans from the EDA while others are guarantees to the banks to encourage lending. Loans can range from $25,000 to $2.5MM depending on what the money will be used for. There are special programs for job creation, capital investment, and urban development. Although the interest rates are low, the fees for these programs can make this an expensive option, depending on the size of the loan.
- Best for: Established businesses who need up to $25,000 and a quick decision
- Rates: 7.5%-18%
- Summary: Companies like Lending Club and Pertuity Direct offer unsecured loans for borrowers with a good credit history. Minimum credit scores that are required are about 660 and up. P2P might be an alternative if you are a credit-worthy borrower who needs a small amount of money and you don’t qualify for traditional loans. The loans are 3-year term loans, which makes monthly payment a bit easier to digest from a cash flow perspective.
- Best for: Businesses with receivables from large companies.
- Rates:2%- 30% (depending on length of time it takes for them to collect on invoice)
- Summary: Factoring is when you sell your accounts receivables to another company called a factor in exchange for cash. The factor will pay you a portion of the invoice upfront and will take a percentage based on when the customer pays the invoice. Many factoring companies require that you sign a 6 month to 1 year contract and factor all invoices through them. This could mean that you can give 3% or more up on each invoice that gets processed through the factor. are not interests in one-off invoice factoring and some require that they receive a minimum percentage annually. This can be an unpredictable and costly way to get cash, however it could be a last resort. Beware, however, that factors take some time to set up because in essence, you are having all invoices sent to the factor and they become the payee and then forward you the cash. Factors will look at your customer’s creditworthiness in order to determine your fee structure. The longer the invoice is outstanding with the factor the less you collect in the end.
- Best for: Businesses who do not qualify for traditional loans
- Rates: 2%-10%+
- Summary: There are a number of non-profits that are lending to small businesses who do not qualify for traditional bank loans. Loans or lines of credit issued by these institutions range from $500- $50,000 and carry an interest rate up to 10%. The Greater Newark Business Development Consortium’s (GNBDC) focus is on financing small business growth and development, specifically those owned by minority, women and low-income entrepreneurs possessing the capability to operate successful business concerns. The Union County Economic Development Corporation (UCEDC) offers microloans up to $35K for startup financing and gap financing for existing businesses throughout New Jersey. Both organizations also offer valuable training classes for continued professional development of their leaders. Be prepared to provide a complete and compelling loan package to these organizations, including financial projections and a well-thought-out executive summary.