If you want to establish a B2B venture but do not have enough funds or want to grow your existing B2B company, acquiring a direct loan might help. To make yourself more familiar with direct loans, here are five options you should know about.
Traditional B2B Bank Loan
Banks are one of the financial institutions that offer direct loans to B2B Businesses. Conventional bank loans are the best type of financing available for a B2B business, regardless of where the funds will be used.
However, banks are strict and often have many requirements for their borrowers. The common B2B bank lending includes tax returns, financial statements, debt schedules, and personal financial statements.
Banks do not take risks and only choose to fund creditworthy businesses. To acquire a B2B Bank loan, you should have good credit and revenues. This option is more suitable for existing B2B businesses that only need funding for their growth.
Interest rates and loan terms differ from each bank. However, the average interest rate expected from a bank loan is around 5-10%, with the loan term usually lasting for 1-30 years. Take your time to look for a bank that can give you a fair offer.
Credit Union Small Business Loan
Another way your B2B business can acquire a direct loan is to get it from a credit union. Entrepreneurs are now more enthusiastic about credit unions as they offer more advantages than a traditional bank.
Compared to traditional banks, credit unions offer a much lower interest rate. Applying for a business loan from credit unions can be a good option due to their high approval rate. And although credit unions and banks have similar requirements, the former is less strict than the latter.
Credit unions are not-for-profit and member-owned institutions. This type of institution has grown over time as its members have also multiplied tremendously over the years.
Peer-to-Peer lending or P2P is another option you can explore when funding your business. This loan option can let entrepreneurs borrow directly from individuals or groups of individuals who are willing to lend money to qualified applicants. If you do not want to borrow money from banks or conventional direct loan lenders, a P2P loan would be your best choice.
These lenders differ from each other in terms of interest rates and loan terms. Before deciding to apply to a P2P lender, you have to do your research first as each lender offers different interest rates and loan terms. Some P2P lenders charge higher annual interest rates than others.
Loan From B2B Lenders
B2B lenders are, in a way, similar to P2P lenders, except they focus more on B2B entrepreneurs to fund their operation or business expansion. Acquiring a B2B loan takes less time compared to a traditional bank.
If you need the funding as soon as possible, acquiring a loan from B2B lenders would be your best option. B2B lenders can process your application and fund your business in as fast as seven days.
Some B2B lenders even approve their borrowers’ applications within 24 hours. They also accept loan applications from entrepreneurs who have a low credit score. However, the entrepreneur will have to pay a premium interest rate to neutralise their risk.
Online Direct Loan
Some direct lenders offer their services online. With the competition in the lending industry becoming tighter, a new breed of lenders has surfaced. These new groups of lenders are found entirely online.
Online business lending has a more convenient and quick process compared to traditional lenders. They determine the borrower’s eligibility within minutes, which makes application fast.
You can choose between a short-term or a long-term loan as this is the option most online lenders offer. Short-term loans usually last for 24 months. This loan is used for short-term needs, such as purchasing initial inventory, marketing campaigns, or working capital.
On the other hand, long-term loans usually last up to 1-5 years and are often used for projects like major renovations or a business expansion. Most long-term loans offer significant amounts to entrepreneurs who want to avail of their service.
There are several direct loan options available for B2B entrepreneurs. Choosing a loan that best fits your needs and capability is crucial, especially if you are using it for a business venture.
How you choose to fund your B2B business can affect how you build and run it.