What Your Small Business Loan Options Are

If your small business is in need of funding, you may have some questions about what your options are or even how to go about securing capital. Below, we have identified five things to consider when it comes to small business financing options:

  1. Time in Business. Because they less established, younger businesses typically have fewer options than those that have been around for a while. While Kalamata Capital does not provide financing for start-ups, we do have a financing option for start-ups if the business owner has a 401(k) retirement plan.
  2. Annual Revenue. Typically, a lender will limit a loan amount to 10-12% of a small business’s revenues. It depends on the profitability of the business and the consistency of the revenues (certain industries are known to be more profitable than others). This is why tax returns are helpful in determining the profitability of a business and how much funding can be allotted.
  3. Consistency. Is your business largely seasonal in nature? This may also affect your funding options. Typically, seasonal businesses have fewer options because their revenue stream is less consistent. If this sounds like your business, there are some interesting options based on daily credit card sales so that the payments are only a percentage of credit card sales. If sales are slow, the dollars spent in financing are lower. This is an advantage instead of having fixed payments going into a slow season.
  4. Average Bank Balances. Lenders will look at what your daily and monthly average bank balances are when making a financing decision. This is a way of looking at debt service coverage ratio to see how much your small business can afford.
  5. Collateral. If you have no collateral, then lenders can only look at your small business’s cash flow. There are plenty of cash flow lenders, but this will most likely impact the interest rate attached to your loan.




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