Looking for more information on small business loans? Check out Honeycomb's Ultimate Guide to Getting a Small Business Loan
Are you looking at loan options to help fund a project you are currently working on, or are planning to start in the near future? If so, hello there!—chances are that your business is well-suited for growth. Or, maybe you need a little extra help after all the challenges the coronavirus pandemic has brought to small businesses across the country.
If you are looking at a loan with your local Small Business Administration (SBA) and are thinking “Can I do both Honeycomb and an SBA loan?” The answer is a resounding “Yes!”
SBA loans and Honeycomb Credit crowdfunded loans can be used together or as alternatives to each other and are very similar in many ways!
For example, SBA loans cover a wide range, from $25,000 to $1 million while Honeycomb does loans from $15,000 to $500,000+. Whether you use them together or wish to decide between the two, here are five ways SBA loans and Honeycomb are similar, and five ways they differ.
How are Honeycomb and SBA loans similar?
1. Similar eligibility requirements
First of all, both Honeycomb campaigns and SBA loans have very similar eligibility requirements, the characteristics needed to be able to apply for a loan. Businesses interested in Honeycomb or an SBA loan need to demonstrate the need for a loan, use the funds for a sound business purpose, and be able to show financial history and equity placed in the business.
2. Both can cover fixed costs and working capital
Certain types of SBA loans can cover both fixed costs and working capital, others are a bit more restricted. Honeycomb loans also can be used either for fixed costs or for working capital. Honeycomb loans can also be used for more creative projects and are flexible, whereas SBA loans can be more restrictive.
Whether you’re trying to open up a new space or get the ingredients you need, pay employees, or maybe fund coronavirus-related safety changes in your business, all have been funded before by other businesses through our platform, and also through SBA loans.
3. Both can help you refinance high-interest loans
Both 7(a) loans and Honeycomb campaigns can be used to refinance high-interest loans and merchant cash advantages, such as ones given by Square Capital or Kabbage. While these kinds of loans might seem like the only option when businesses are faced with unexpected costs or need some extra cash flow for expansion, they often come at an exorbitant cost.
4. The application requirements for SBA loans and Honeycomb loans are very similar
To make it even more convenient, you can practically apply for SBA loans and Honeycomb at the same time because the things you need to apply for each of them are practically identical. For Honeycomb campaigns, you need to submit financial documents, personal credit checks, and abbreviated business plans. SBA loans have a very similar checklist.
5. Comparable interest rates
Honeycomb and SBA loans have similar interest rates as well. SBA loans typically are the prime rate plus a certain percentage, about 2.25 - 4.75 %, resulting in a total interest rate usually of 5-8%.
Honeycomb loans range quite extensively, depending on prior operating history, the strength of the business plan, and the personal financials of the business owner, and is usually from 5 - 12 %
What does Honeycomb have that an SBA loan doesn’t?
1. A Honeycomb campaign builds your local community network
Honeycomb is a unique platform in that it connects investors from your community to your campaign. So, you not only have the chance to crowdfund from your immediate neighbors, but also from investors (and potential customers) who’ve never been to your business! This is one way in which Honeycomb can be a more valuable alternative to an SBA loan.
The Honeycomb network is also valuable for connecting you with other small businesses with who you can collaborate with. For example, Honeycomb alum. Melissa Hirsch, the owner of UnBar Cafe in Cleveland, has collaborated with other alumni such as Squash the Beef and GO Buddha to sell their products in her cafe!
2. A Honeycomb campaign creates marketing and promotion buzz
The bank or SBA won't help market or promote your business, but Honeycomb gives businesses a chance to tell their authentic growth story and tools to amplify that message.
We host pitch events, write blog posts, and promote on social media to help you get the word out. This helps build buzz, engagement, and level up customers.
Our businesses on average see 7 press articles about their campaign and a doubled increase in Yelp and Google+ reviews. All of this ultimately translates into a 33% revenue increase.
We also have a wealth of resources for you to be able to take promotion into your own hands, such as this blog post on marketing your small business!
3. Getting money in the bank is much quicker through Honeycomb
A typical Honeycomb campaign can run from 45-60 days, which is way faster than the process for getting an SBA loan. Also, a business running a Honeycomb campaign can get using their money as soon as they hit the minimum funding goal, and continue raising funds for as long as their campaign runs! Then, a term agreement will last 3-5 years, depending on your business’s needs.
An SBA loan, however, takes about 60-90 days to process and can take 5-25 years to come to maturity.
4. Honeycomb can be flexible on collateral position and level of personal guaranty
SBA loans almost always require a business to give up the first lien position on all assets of the business and generally require the owner to pledge their own personal residence as collateral as well.
Honeycomb is much more flexible and doesn’t always require a personal guaranty, although they do help to lower your rate. In other words, you have more control over what collateral to offer and what rate you receive.
5. Honeycomb offers specialized support from crowdfunding experts to help your campaign succeed
One of the really unique features of the Honeycomb campaign process is that you get connected with an expert on our Customer Success team, whose mission is to support you through your campaign, every step of the way.
Our Customer Success team helps you strategize for promoting your campaign to the community and give you tips on how to run a successful campaign. Some of our most successful campaigns have benefited from meeting with their Customer Success expert weekly, greatly helping their campaign reach the finish line.
Grow your biz, get some buzz with a Honeycomb Credit loan
If you're just looking for some cash, SBA is likely the route for you. But if you're looking to get some strong community engagement and marketing buzz alongside the funds to grow, a Honeycomb campaign is for you!
Whether you’re looking to supplement or complement your SBA loan application, we can help connect you to a wide network of investors and small businesses, support you through the campaign process, and give you the confidence to grow successfully. Learn more at www.honeycombcredit.com/grow
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