Where are Startups Seeking Commercial Loans?

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Where are Startups Seeking Commercial Loans?

p4_img5bCommercial loans from traditional lenders are difficult to come by for those just starting their business. Fortunately, there are alternatives including online, factoring, crowdfunding and private hard money lending


If you are a recent low credit risk startup, you have probably obtained a commercial loan from a bank, or at least that’s what the statistics are telling us. Those with medium to high credit risk are more apt to obtain a loan from an online lender or credit union than their fellow startups in the lower risk category. Whatever your situation, it’s clear that you need capital. An underfunded small business is one of the main reasons that 50 percent close their doors within the first five years. Consider this strategy before searching for capital.

Get some “skin in the game.” Investors want to know that you are going to be invested in your business just as they are. If you are currently looking for 100 percent financing, rethink this strategy. Any type of investor, be it bank or private hard money lender, will want to see your business and marketing plan as well as your past successes. If you’ve successfully run a business or managed a company in the past, be sure to include this in your portfolio. This will demonstrate your skill set and knowledge base. As a startup, you will most likely require collateral to obtain a loan. If you’ve been at it for a bit, you may have equipment or inventory or accounts receivables that you can use. If you haven’t broken ground yet, your best form of collateral is often your home or, in some instances, your car.

The truth is, these days, if you are a startup, you will probably need to obtain a commercial loan from alternative lenders. Most small businesses are now considered lending risks by larger traditional lending institutions. These may include online, factoring, crowdfunding and private hard money lending.

Which Route is Best for You?

Online lending takes two forms: peer-to-peer and platform-based. Platform lenders require that you are already in business and show strong credit card sales because you will be giving them a percentage of your future sales. Peer-to-peer requires good credit and is presently a strong performer. Factoring is, again, ideal for those already starting as this type of loan looks at your account receivables and loans accordingly. Crowdfunding sounds good for all intents and purposes. You need to have a good strategy in place before starting your campaign. This includes a professional looking video and a good social media presence as well as a prototype of your product. There are several different types of crowdfunding with the two most popular being rewards and equity-based. Equity based usually, though not always, is the choice for startups as investors usually give larger amounts of money and companies can then go on to raise funds from angel investors or venture capitalists.

Private hard money lenders are asset-based lenders.
The good news for startups looking into private hard money lenders is that your credit scores or creditworthiness is not as important as it is with traditional lenders. On the other hand, you do need collateral. Investors will typically fund 70 percent LTV. Getting cash is quick with commercial loan funding sometimes occurring in less than a week. Call us for a no-obligation quote to see if we have the funding that you need.

Dennis Mortgage Broker ArizonaDennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:     (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701


About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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