During the economic downturn of 2008-2010, banks really cut back on their lending. Has that changed today? In my opinion, it depends upon if you business needs money or not. If you are cash and other asset poor, you are still going to have a tough time finding bank financing. If you have a profitable business with a lot of equipment and equity in the business you may not find that to be the case.
If you are looking for funding, where can you look?
· Friends and Family. Friends and family may buy your dream, whether or not a business' numbers are positive. However, remember that things can get messy and different when you introduce financials and possibly business stress and conflict to a relationship. Think hard before you go this route.
· Angle Investors / Angel Groups. Angels are accredited investors who had the resources and risk tolerance to allow them to invest in private companies. In addition to individual angels, you may find angel groups. These angel groups, such as Wilmington Investor Network andIMAF Cape Fear, allow individual angels to spread their risk while coming across a greater deal flow. Angel investors typically want equity (ownership) for their investment in a business.
· Venture Capital. These are your more sophisticated investors that will typically only consider deals that involve large dollar amounts with high growth companies that have the potential for a large exit event. They typically prefer deals referred to them by angels and other investors and can take large equity stakes for their positions.
· Banks. Banks can provide lending options for a business, whether funded by the bank and run through the SBA. Community banks will tell you that they are more understanding of the business narratives vs being 100% numbers driven. Banks typically want to see assets, also called collateral, and owner equity (investment) in the business.
· Alternative Lenders. New alternative sources are becoming more common. Sites like Fundera are offering alternative means for business owners. They can perform the funding themselves or, like Fundera, serve as a market place that matches up lenders with borrowers. Alternative lenders will charge a higher interest rate than traditional lenders but can serve as a good resource when traditional lending is not an option.
What is going to be the best answer for you, really depends upon your situation. Get your CPA firm involved in that discussion.