by Elijah McCoy, CEO of McCoy Brokerage Service
The digital world made starting a business easier. Anyone with a computer, a phone and a spare room could give entrepreneurship a try, no office or storefront necessary.
Or so it would seem.
In truth, not every business can operate without a brick-and-mortar presence. Cyberspace isn’t sufficient when a budding entrepreneur wants to open a bowling alley, laundromat, car lot, restaurant, motel or any number of other businesses.
That means they need to buy, rent or renovate property, and purchase equipment. That also means they are going to need the capital to turn their entrepreneurial dream into an entrepreneurial reality.
But securing that capital is not always easy. Entrepreneurs who want to launch a small business, or small businesses that want to expand, often find that lenders are reluctant to provide the cash they need to make their vision happens.
Yet the need is growing. Since the pandemic, the number of people who feel the urge to start a business has increased dramatically. The U.S. Census Bureau reported that 5.4 million new business applications were filed in 2021, up from 4.4 million in 2020.
Many of those people were part of the Great Resignation, the movement among millions of Americans to quit their jobs and refocus their lives. In numerous cases, that refocusing involved people who longed to be their own boss. But being your own boss also means taking on responsibility for overhead expenses – possibly including real estate – that someone else handles when you are an employee.
Sometimes business owners or would-be business owners go to lenders and they think they have a great idea, but for whatever reason the lender rejects their application.
The key is to not give up. If one lender says no, it’s time to find another one.
There are options out there. You just have to persevere until you find the right match.”
Some of those options include:
A conventional loan for a business is somewhat similar to a personal loan. Banks, credit unions and other financial institutions offer them and, just as with a personal loan, the business borrows a lump sum and repays it over time, along with interest and fees. With conventional loans, though, borrowers may face more stringent requirements to qualify than with some other types of loans.
Small Business Administration loans.
The Small Business Administration is a government agency that partners with private lenders to provide loans to businesses. This can be a good option for businesses unable to secure a conventional loan, but certain requirements still must be met to qualify. In fiscal year 2021, the Small Business Administration provided 61,000 loans totaling $44.8 billion to small businesses.
Hard money loans.
A hard money loan usually isn’t the first option when someone is seeking to purchase real estate for a business, but these loans do have advantages. The loans typically are based more on the value of the property than the creditworthiness of the borrower, and the closing can happen much more quickly – sometimes within 48 hours of the appraisal review. Unlike with conventional loans or SBA loans, hard-money lenders usually are private individuals or companies, as opposed to a bank or credit union.
When you are seeking a loan for your business, it’s a good idea to shop around. You want to get the best deal possible for what you are trying to accomplish, and it’s all the better if you can find and work with someone who understands your needs. Ultimately, you want to match your objectives with the most appropriate lender in the most timely manner.
Elijah McCoy is CEO of McCoy Brokerage Service, a company he founded in 2006. McCoy’s firm works with businesses throughout the country that are trying to secure financing. Much of McCoy’s clientele is in healthcare, such as doctors, dentists and pharmacists, but he also has worked with a broad range of people in other industries. He is a certified commercial loan expert and financial consultant.