Creating a business website is one of the most crucial ways to build a brand and market a product or service. A business website will help spread awareness for your business and give consumers a chance to learn more about what you do. Even if you don’t plan to sell your products or services from your website, its presence will make your company seem more trustworthy and professional. Below, we cover the basics of creating and improving a business website.
Although business websites differ in format and purpose, there are some general aspects that all business websites should cover. We recommend handling these tasks at the beginning of the process to improve efficiency and reduce stress down the line.
Choosing a good domain name will help set up your website for success by providing an experience that is aligned with your brand. A domain name is the name of your website, which is also the address that users navigate to when searching for your website on the Internet. For example, credibly.com is our domain name.
The most important factors when choosing a domain name are simplicity, branding, and availability. You can check the availability and purchase domain names from a variety of providers, including Google Domains.
A website host is an internet service that allows you to make your website accessible on the world wide web. This is the space where the files of your website actually live.
There are two types of website hosts: shared servers and dedicated servers. A shared server is a server that hosts multiple websites simultaneously. While this approach is typically cheaper and often requires fewer technical skills, sharing resources can increase security risk and limit performance. Dedicated servers on the other hand are single servers that are solely utilized by your website. This allows for total utilization of server resources and customization, but it is typically more expensive and requires technical knowledge to configure and maintain. When looking at which type of server you want for your business, you will have to weigh the pros and cons of each and assess your available resources to determine which is the best fit.
A content management system, or CMS, is a software application that can be used to manage the creation and modification of digital content. In short, a CMS allows you to make and design your website without needing to know how to code.
While most content management systems operate similarly, they have slightly different interfaces and features. WordPress is the most popular CMS on the internet due to its customizability and admin capabilities, but it is not the most intuitive platform for first-time webmasters. Squarespace and Wix are two alternatives that have easy learning curves and drag-and-drop page builders, but they are often more expensive, less customizable, and lack advanced features. With that said, Squarespace and Wix also provide domain purchasing and hosting, allowing for a simplified all-in-one package that may be ideal for business owners who do not have the skills or in-house resources to build out a WordPress website.
When designing your website, you should always be conscious of the front-end users who will be navigating your pages. It is critical that you provide an intuitive user experience and relevant information that allows visitors to quickly find what they need, such as product information, contact forms, and clear information architecture. The more user-friendly your website is, the more likely consumers will come back to it. By building a user path that is designed to add value and convert users, you should be able to drive significant business volume.
A simple and often-overlooked tip is to ensure that your website is always up to date with the most current information. Be certain that your website contains accurate contact information, product and service explanations, and relevant content. This ensures that your brand and offerings are communicated clearly and effectively and that no potential customers are turned off by a bad experience.
Once you have a basic website, you will likely have to improve or enhance it as your business grows. Between adding new content, improving user paths, and increasing your visibility on search engines, even the world’s leading companies are constantly striving to optimize their website and digital experience.
E-commerce, or commercial transactions conducted online, can be a great way to expand your business as your target market is not confined to your local community. Everyone has access to the internet and purchasing products online is more common and easier than ever. While e-commerce isn’t a great fit for every business if your business sells a product that is easy to ship directly to consumers this is a great opportunity.
Using analytics can be a great way to track and improve your website’s ability to convert prospects into customers. Google Analytics and Google Search Console are free platforms that allow you to keep tabs on how users interact with your website and how visible your website is on search engines. By understanding how your prospects find and navigate your website, you can implement improvements that increase traffic and conversions to drive more business.
SEO, or search engine optimization, is the process of growing the quantity and quality of website traffic by increasing your website’s visibility on search engines. Increasing your website’s organic search traffic can be a massive growth opportunity as it increases your presence among relevant prospects.
Here are some basic key factors of SEO that can be used to increase website traffic.
Blogging can be a great way to establish subject matter expertise, build authority, and shine a light on industry-relevant news. The continuous addition of new content keeps your website updated, provides new opportunities for keyword rankings, and gives business owners something to share with their audience on social media. By adding value and covering topics that your prospects are researching, you can build serious awareness without having to pay money for online advertising.
As a small business, efficient marketing is critical. Most small businesses do not have comparable budgets to large corporations, despite having to compete with them for the same customers. However, by taking advantage of free marketing solutions you can drive significant demand without fronting a large cost. Below, we highlight 11 of our favorite small business marketing strategies that you can support on a budget.
Even in the absence of formal market research, every business should have a thorough understanding of their target audience. After all, most companies have customers who share very similar needs, attributes, or characteristics that your company’s product or service solves. The better you understand your target audience, the more effectively you can market to them.
Buyer personas are a semi-fictional representation of your ideal customer-created based on market research, customer data, and a few educated assumptions in order to help you better understand and relate to the market segment you are targeting. By analyzing trends, behaviors, similarities, and patterns amongst your relevant audience, you can create a hyper-targeted marketing and sales strategy that is tailored to the persona’s desires, challenges, and pain points.
For example, if you own a business that sells diapers, your buyer persona will likely consist of couples between the ages of 25-40. By extrapolating the persona, you can make inferences about their interests, media consumption, and shopping habits to plan marketing campaigns that focus on reaching only the most relevant prospects, in turn saving you money while boosting sales.
One fatal mistake many business owners make is not coming up with a marketing plan. Without an understanding of where you plan to spend your marketing dollars and why it’s common to see zero return on investment.
Rather than coming up with marketing ideas and executing them randomly without measurement, it is more effective to have strategies implemented at specific times, for specific durations with measurable results. By crafting a marketing plan that clearly shows the actions and steps, timing, and cost, your company will be better positioned to meet its sales goals and stay on budget.
Having an online presence is critical, even if your business does not sell products online. It is of the utmost importance that you have a business website, social media platforms, and a Google My Business account to ensure that you establish and grow your digital footprint.
The majority of people who hear about your business will likely start by researching your business online and if they do not know that you exist, you will lose out on many potential customers. Even if you never plan to run digital ads, growing your organic and local presence through your digital assets can help you establish a reputation within your industry and local community.
Everyone who visits your website, social media profiles, or local listings should be able to understand what your business offers and how to contact you if they are interested. Creating social accounts and local listings is free and if you have the ability to create your site in-house, your only costs will be the domain and hosting package.
Cost: Free, except for website domain purchase and hosting
While many businesses choose to spend all of their marketing efforts on new acquisitions, it is typically far easier and far less expensive to upsell an existing customer than it is to acquire a new one.
Providing excellent customer service and engaging existing clients is the key to relationship building. For example, if you own a restaurant it is important to attract new customers, but it is even more important to provide excellent food and service with each visit to ensure you give them a reason to come back. Great restaurants have been known to follow up with their guests days or weeks later to thank them for their visit, which shows the customer they are important and sets a great expectation for the next visit while also helping to remain top-of-mind.
Now more than ever, social media marketing is a key tactic to inexpensive marketing. Smartphones are commonplace and the majority of people use social media daily. With the ability to easily find out information about any business, its product offerings, and what it stands for, consumers are no longer reliant on paid advertising to discover new businesses.
Because each social media platform has different strengths and weaknesses, it’s critical that you understand how to leverage each individual platform. Facebook is great for promoting events and creating groups, Instagram is a great means to show your culture and new products, and YouTube is great for establishing subject matter expertise by offering free tutorials. By properly leveraging each channel, you should be able to build a large organic following of relevant prospects for free.
Co-marketing is a collaborative marketing strategy in which your business partners with another company to co-promote a product or service and share the results. Co-marketing can be mutually beneficial to all parties involved because it allows companies to be more cost-effective by pooling together resources, sharing audiences of similar prospects, and fostering a positive long-term relationship between multiple companies (and sometimes communities).
Co-marketing is typically done between adjacent/complementary businesses, not direct competitors, to ensure that no sales are cannibalized. An example of co-marketing could be a lawn care company teaming up with a home cleaning service to provide a giveaway or bundled pricing. Another interesting real-life example of co-marketing is Uber and Spotify’s campaign in which they collaborated to allow Spotify users to play their favorite playlists on their Uber trip.
Writing blogs can be an effective way to market your business as the upfront costs are low but the potential exposure and subject matter expertise are massive. By providing information that people need, a business can establish itself as an expert in that space and draw in customers who might just be researching potential solutions to their problems and objectives.
For example, a daycare company might have a blog about how to protect children from harmful sun rays at the beach or park, because the audience for that blog post would be the same as a daycare: parents of young children. By adding value and flaunting your expertise in front of new audiences, you should be able to capture new, highly interested prospects.
Cost: Free, if you do it yourself
Products or services that are completely new ideas or expensive often prohibit interested prospects from buying as the purchase has a much higher associated risk. In these circumstances, it may be easier to sell if the customer can “try before they buy”.
If you are confident that your product will be well-received by customers, it can be very effective to offer a free trial or host an event in which the customer can try it out. The idea is that they will enjoy the product so much that they choose to purchase it for themselves, and then refer other customers through word of mouth.
For example, if you are selling a new cosmetic product, it may make sense to produce a trial size that you give away for free or for a reduced cost. That way, you can show customers proof of concept at the first purchase and secure a long-term customer.
It is important to understand which of your marketing strategies are working so that you can allocate all of your marketing efforts and spend to the most effective activities and campaigns. However, if your business does not operate online, you may only have so much customer data. One great way businesses get around this is to ask customers how they found you at the point of sale. Most will be happy to tell you and they may even help you identify new effective marketing channels.
For companies that operate online, Google Analytics is a great way to see where your online traffic and sales are coming from (social media, organic search, etc.). Ideally, you will be able to pair analytics data with customer insight to better understand your customers and marketing effectiveness. As you gather results, you can reallocate resources to optimize your budget and grow your business.
Email marketing is a fantastic means for converting customers, especially if your business specializes in online sales. Email newsletters can help nurture and close customers who aren’t buy-ready at the first interaction but are generally interested in your product offering.
Email marketing is effective because it can be highly personal, highly targeted, and incredibly low cost. And with the onset of smartphones, email marketing also allows your company to reach people while they are on the go.
However, it is critical to measure the impact of email marketing and your audience growth because email marketing platforms are not free. For it to make sense, the benefits must outweigh the costs, so we recommend having a granular understanding of how frequently you plan to engage each audience segment.
Cost: Varies, typically charged monthly
Lastly, learning a little about search engine optimization (SEO) can really help your business thrive. Optimizing a business website for search engines typically pays off better than online advertising in the long run as your presence does not disappear when you stop purchasing ads.
You should familiarize yourself with the basics of SEO, which is essentially the process of increasing website traffic by increasing the visibility of your website on search engine results pages. Through backlinking, keyword targeting, and off-page optimization, you can help your web pages climb the rankings, in turn generating more traffic from the most relevant leads.
CONCLUSION: Marketing can be very expensive, especially if your strategy is to outspend your competitors’ advertising costs. But by choosing the most relevant low-cost and free options for your situation and executing properly, it is possible to outperform your big business competitors without spending much money at all.
Director, Marketing & Strategic Partnerships
Taking a loan for your small business might be the biggest decision you have ever made. It’s important to get your facts together and make the best possible decision. Whether you are borrowing to save, sustain, or grow your business, you need to know these rules.
This article will take you through the following proven 4-step approach to get the most value out of borrowing money:
First, you need to decide which of the three reasons business owners borrow money applies to you.
Your business is successful and you want to keep the momentum going. Below are some scenarios where you would take out a loan to become even more successful:
Maintaining a stable business is one of the hardest things for small business owners. Sometimes, an injection of cash is needed to ensure your business stays ahead of the curve. Some examples of when you would borrow money to maintain your business include:
Your livelihood is on the line and you need cash quick to keep your business from crumbling. Borrowing money to save a struggling business includes some of the following scenarios:
Now that you are sure of why you want to borrow, you need to follow these five rules before your business takes on debt.
Borrowing with no business plan for the next six months is a recipe for failure. Getting help to create and execute a realistic, data-backed business plan is one of the top reasons entrepreneurs seek small business coaching.
Make sure you have a documented plan for each of the following areas of your business:
Your financial projections are especially important. Document how much you expect to spend in each area and exactly how that investment will turn profits.
Some business owners have a vague plan to pay off their debt. “When the profits start rolling in” is not a good enough answer.
In addition to the business plan above, you need a clear plan to pay your loan back.
Map out exactly what date you plan to make your last payment. Having a clear repayment plan will keep you on the right track, no matter how long it takes.
It is tempting to take out a business loan when profits aren’t where they need to be and you have a personal debt to service.
The reason this never works is bad financial habits cannot be fixed by more money. Taking out more debt to pay down debt creates an endless spiral that you will never recover from
One of the first things some small business owners do when they get a line of credit goes out and buy things they want, but not what their business needs. It’s often things like remodeling their house, getting a new car, or buying the boat they always wanted that eats up their funding.
The worst thing you can do is take your foot off the gas because your immediate money needs are solved. You’ve been working hard and you need a break, but keep it going for just a bit longer and this might be the last time you have to borrow!
You want to do the exact opposite. Right after securing a loan is when you want to work harder than you have ever worked. Paying yourself is the expense you can control the most.
Don’t take more profit because you are working more hours. Think long-term and turn the effort you are putting in now into more profit you could ever dream of six months down the line.
Your profits are low and you have no idea how you can pay your expenses without a loan. Answer the following four questions to make sure borrowing money is the right decision.
If you don’t identify the root cause of the problems that got you here in the first place, borrowing money will only be a short-term fix.
Then, you will eventually end up in an even bigger mess. If this weakness still exists in your business, it is only a matter of time before this new injection of cash vanishes.
Getting your head above water is urgent, but stop and solve whatever you can without money.
In some cases there is no way to solve an issue without a loan, so create a strict written plan for exactly how you will solve it as soon as you have the money.
You probably feel exhausted by all of the stresses of having a struggling business. You want to just be able to enjoy some time off, but now is the time to dig in and work harder than you ever have!
Don’t lose hope. Think of how great time off will feel once you pulled your business out of the gutter.
Taking out a small business loan has to be your absolute last resort if you are struggling. Triple check your financials to make sure it is the only way to save your business.
Are you sure you have cut every single expense possible? Did you try every possible thing you could do to increase sales?
Maintaining a stable business can get costly. Make sure to answer these three questions before taking out a loan.
Making improvements to your business feels great, but they have to factor into your profitability if you need a loan to make them happen.
If you are upgrading your IT equipment, for example, it has to be because you have to do it to make more money – not simply because you wanted new equipment.
Can you try running a promotion for the next 90 days? Make a big marketing push and incentivize your team to produce more.
Think outside of the box and see if you can come up with a way to boost sales and get the cash you need.
Think about the last time your business was in trouble. Remember how easy it was to make major cuts?
Maybe you can cut some of the same expenses temporarily. Consider eliminating non-essential roles and pausing monthly services that you don’t really need to succeed.
We have all heard the saying “Grow, Grow, Gone”, so be careful that you don’t take on unnecessary risk by answering these three questions.
You are profitable now, but do you have the systems in place to be profitable for years to come?
Building for long-term profitability requires you to have a systems-dependent business rather than a people-dependent business.
Even if a business is great now, you still need to think about future threats to your business.
Is the economy unstable and heading towards another recession? Is there some risk threatening your industry that could cause a business to slow down?
Make sure these changes aren’t around the corner to keep yourself from getting blindsided.
When you do opt for a business loan, you have to know for a fact that you have enough profit to service your debt and interest. This requires you to have a strong understanding of your financials. Ideally, you have been doing a full financial analysis every month.
Create a growth plan and document how much funding each part of it will take to execute.
Taking a loan is a big decision and this article is designed to help you make that decision, but consider talking with an expert small business coach before you sign that dotted line. Someone with real-world business experience who has been right where you are now can give you insights that you may not be able to get on your own.
No matter what kind of business you own, one thing is always true: If you don’t have a strong cash flow, you’re going to run into a lot of trouble. Without working capital, the money necessary to fund short-term needs and operations, businesses cannot continue to run.
Growing companies often find themselves short on cash as they expand day-to-day operations. It is critical that companies properly manage their cash flows and expenses to ensure there is enough working capital to maintain business continuity.
Working capital can come from a number of sources: daily income, business lines of credit, and even working capital loans. Whatever the source, working capital can quickly become tied up in daily operations, inventory expenses, outstanding bills, and other day-to-day financial needs.
If these situations are creating challenges for your business finances and you need to find a better way to manage your working capital, or if you’re considering taking out a working capital loan and want to know how best to use the available money, here are a few ways to make your working capital work harder:
Working capital is most typically linked with stock and inventory. Slow-selling stock and outstanding customer invoices can impact your company’s working capital by reducing the amount of available cash you have on-hand. With money idling in unsold inventory, growth activities often halt – making it difficult to spend when and where you need it.
This poses a difficult situation. In order to grow, companies need enough inventory to meet demand. But they also need enough working capital to reach new customers while continuing daily operations.
Securing extra working capital can help you manage your stock more effectively, or give you additional cash flows to help you navigate through your inventory issues until you’re able to unload your slower-moving items.
“Overtrading” is a term used to describe companies that engage in more business than can be supported by the market, funding, or resources available. Often times, companies make purchases of new equipment or inventory without the sales and profit needed to pay them off, or they promise customers more than they can deliver financially.
Unfortunately, this can create a ripple effect that impacts nearly every financial requirement the business has. As late payments and invoices begin to stack up, companies tend to find themselves in a position with enormous accounts payable or receivable, and insufficient working capital to finance daily activities. While engaging in more business is typically good for growth, overtrading can run a company into the ground by freezing core activities.
By securing additional working capital through loans, or making better use of your current available cash flow, companies can ensure that money is available for any outstanding business transactions and prevent the negative effects of overtrading.
A common solution for small business owners facing a cash shortage is to seek outside investment in return for some ownership of the company. However, this can prove to have a bigger hindrance on business operations later on.
When you give up a portion of your company, you’re also surrendering some of your decision-making power. Private investors typically want a certain degree of control over their investment, and this often conflicts with the existing growth strategy and trajectory of the company.
By securing a working capital loan, or managing your current capital flow, you can keep your business self-sufficient to avoid outside influence and spend the money where you see fit.
While working capital is good for solving issues like inventory management, it is ideal for meeting immediate, short-term financing needs. With limited working capital, unexpected issues like sudden building repairs can freeze business operations.
By injecting money into your business when it’s needed most, working capital can help you keep up with changing marketplace demands or any setbacks you encounter along the way. Instead of compromising daily operations to mitigate the unexpected issues, companies can easily navigate the adversity and continue to grow their business.
Proper management of available working capital can help your company stay ahead of financing needs, and keep your business growing. For that reason, working capital loans are often the best decision for businesses who just need a little boost to continue their momentum. Credibly offers various types of small business loans and working capital loans to tailor a lending solution to your business and financial needs.
No matter what kind of business you own, you’re bound to be affected by your business credit score at some point. Much like your personal credit score, the credit of your business can impact your ability to get funding, your ability to secure product, and even your ability to expand into other locations in certain cases.
Even if you frequently monitor your personal credit score and understand how credit works, business credit can be a pretty unique beast on its own.
We’ve explored the impact of bad business credit in previous articles, but if you’re looking to get a better understanding of how business credit works and what it can do for your business going forward, we’ve got the information you need right here:
Let’s start at the top. Much like personal credit, a business credit score is a number that represents a company’s ability to pay back its debts. A number of factors can go into how this score is calculated (which we’ll explore in more detail later on), and each business’s credit score is tracked by the company’s name, address, and either their federal tax identification number (FIN) or their employer identification number (EIN), similar to how a private citizen’s credit is tracked via their social security numbers.
Business credit is calculated using a number of factors, primarily relating to the financial history of your business and its ability/willingness to pay back outstanding debts. A few of the most common and heavily weighted factors in this decision include:
Many more factors can have an impact in determining a business credit score, but these are arguably the most important.
Good credit is ideal for businesses the same way it’s ideal for individual citizens. A higher business credit score gives you better opportunities when you apply for small business financing. This means qualifying for larger funding amounts and receiving better rates and terms.
Hopefully, with this advice in mind, your future business financial planning will be a little easier—or at the very least, done with more understanding of how your credit score may be affected.
No matter what your business does or how you manage your finances, chances are there will come a time when you consider getting a small business loan to help out.
There’s plenty of reasons for this: expanding into a new location, keeping up with new inventory, or even just getting some quick capital to sustain your business through a temporary setback. Whatever your financing needs, however, there are always going to be a few things to consider during the application process to help you best understand what you need the money for, how you can get it, and what effect this might have on the finances of your business in both the short and long term. If you’ve been looking into small business funding, here are five questions to ask yourself before you apply — or even during the application process.
This might sound a little obvious, but these needs are always worth considering. A lot of business owners are too quick to identify financial shortfalls as a need for a loan, or conversely they’re too quick to try to fund a big project themselves when it could cause a lot of short-term cash flow problems for other areas of the business that will need the money more quickly, like inventory and payroll.
Before deciding if you need a loan, review your current financial standings including outstanding debts and projected income, and then make sure to get solid estimates of how much you might need for whatever you’re trying to finance. Get quotes from vendors or contractors, or if you’re just looking for working capital to help cover expenses above and beyond your typical revenue, make sure you calculate how much you’ll need and how much you can afford to pay back.
Most small business lenders will look into both your business and personal credit. We’ve talked in the past about keeping business and personal finances separate, and this is a big part of why — strong business credit will give you more leverage when trying to get business funding and may open the door for opportunities you wouldn’t have had with a lower credit score and/or too much of your personal finances wrapped up in your business.
As anyone with a mortgage can tell you, the worst part of getting a loan is probably paying it back. Business loans are no different, and it’s crucial to figure out if your business has enough income and revenue to put towards whatever regular payment plan the loan requires. It isn’t enough to just know you have enough money to pay it back — you need to make sure that the money coming out won’t hamper your business in other regards.
Having a strong business plan is something of a prerequisite for success in any field or industry, but it can also factor into any attempt to get extra financing. A lot of lenders will request to see a business plan as part of the lending process, and even if most platform lenders don’t need a formal “business plan” they may still request to see documents detailing the viability and success of your business to determine how much funding you can qualify for and what you can reasonably payback. Either way, you’re going to want to make sure you can provide this information.
Finally, if you’ve figured out all the steps you need to take before you can apply for funding, the last thing is to figure out exactly what kind of financing can best fit your business. Working capital is a good choice for businesses that need some extra cash in the short-term and have a steady enough revenue stream to pay it back, but it might not be sufficient for major projects like office renovations or business expansion which will require a bigger amount of capital.
Once you’ve got the answers to these five questions, you’ll be a lot closer to finding a business loan that fits your needs. If you’re curious to see how Credibly can fit your business financing needs, pre-qualify today and get the process started.
Anyone who has owned a small business for an appreciable length of time has encountered the need for some extra cash at least once.
And, of course, if you’ve decided to start looking into small business financing, you’ve probably encountered a ton of different terms, many of which you may have never seen before. Two of these most common forms of business funding are small business loans and business lines of credit, typically referred to as simply lines of credit.
Sure, they’re both ways to get your business some extra cash when it needs it the most, but which is right for you? Are there any differences between the two, and which one can be most helpful for you? Let’s break it down and shed some light on the subject:
Business Line of Credit
A business line of credit, at its core, isn’t too different from a personal line of credit such as the credit cards you carry and use every day. You have access to a set amount of financing and you don’t incur any interest or have to make any payments until you use the funds for whatever you need.
Different types of business credit lines exist, many of them with slightly different stipulations as to how and when they can be used. “Revolving” lines of credit, for example, allow you to borrow as much as you need against the line of credit and pay it back. These credit lines are generally used for much more long-term financing needs and can be offered for a period of up to 15 years in some cases.
Small Business Loans
Small business loans, on the other hand, tend to be more direct and short-term. Generally secured in a fixed amount, business loans give your business a set amount of cash all up front for a specified purpose such as financing business expansion or replacing needed business inventory.
As the entire amount is provided upon receipt of the loan, the repayment plans tend to work differently than with lines of credit, and can vary depending on the amount loaned and how the loan was used. Generally speaking, business loans require some kind of plan or documentation showing how the loan will be used, or at least a description of the business need that the loan is fulfilling.
Business Loans vs. Lines of Credit — Which Should I Pick?
As with any need for small business financing, the sort of funding you pick should be the one that best meets the need of your business and the specific funding need you’re trying to fulfill. In many cases, small business loans offer more advantages such as flexible repayment plans and variable funding sizes, so for a short-term business loan or for a business that would be better off with lower payments, something like working capital would fit the needs of your business better. It’s important to weigh your options and to decide what’s best for the health of your business in the long term before settling on a form of business financing.
If you need access to small business loans and want to learn more about what they can do for you, apply for small business loans with Credibly today and see what we can do for the health and future of your business.
To the average business owner, it can seem like there’s a nearly endless array of options for small business loans. The terms and options can get a little overwhelming, but if you really boil it down, most options for small business funding can fall into one of a few different categories.
Two of the most common classifications of business loans are secured and unsecured. If you’ve been in business for any appreciable amount of time you’ve likely seen these terms before, but we know they can get a little overwhelming when you’re looking for funding, and learning the advantages and uses of each can make all the difference when you have to pick your next business loan.
The biggest difference between the two of them lies in the name: secured business loans require collateral to the bank or lending entity, whereas unsecured business loans are any loan made to a business without collateral.
Collateral, as you’re probably aware, is anything your business owns or possesses that’s considered of equal value to the amount of the loan, generally given to provide security and incentive for you to pay the loan back (hence the name ‘secured’).
Each of these loans are applicable to different situations and can satisfy different needs at different times. Before deciding on which type of funding is best for you, ask yourself a few questions about your business to help you decide:
Many lending agencies are more prone to giving out secured business loans, as they have a greater assurance that the amount of the loan will be paid back.
If your business has anything of value that you can put up for collateral, you run the risk of losing it if you’re unable to pay back your loan but you also greatly increase your chances of the loan actually going through. It’s a good way to make getting your loan more of a ‘sure thing’ if you have collateral to offer.
No judgment here, but there’s a lot of people out there who might not have the sort of A+ credit that banks like to see that still own a business and need extra financing. Secured loans tend to be easier to get if your credit score is less than perfect due to the collateral involved, but it isn’t a guarantee either way – better to weigh your options when able.
Not every business expense has the luxury of being easily foreseen or telegraphed, and sometimes business funding needs can crop up with extremely short notice.
Unsecured loans tend to be approved and provided faster due to the lender not having to review your collateral or anything, and even if you’re approved for a smaller amount than you might have been with a secured loan the turn around time can make all the difference in the world sometimes.
Granted, this is a question you should always be asking yourself, but it particularly applies when deciding what type of loan you’re getting. Secured loans, by nature, will always have to be more strict about their repayment terms and schedule, whereas unsecured loans (generally speaking) can afford to be more lax or favorable in their repayment terms.
Before taking on any extra business debt, however, it’s important to consider your ability to repay the loan, and on what terms you’ll be able to.
Equity financing is a unique way of raising money and capital for your small business that many small business owners remain unaware of, or at least unfamiliar with how it works.
The term “equity” refers to the ownership that both the business owner and any investors (if applicable) have in a company. Whether through signed partnerships, shares and/or stock that is bought and sold, individual owners and business partners are considered equity to a small business.
Equity financing, then, is the act of raising money and finances for the small business in question through these investors. To put it simply, equity financing is the business owner giving away part of their ownership interest in their business in exchange for money. Consider it an investor buying a piece of the business and looking for a return on their investment in the form of profit-sharing, repayment, and more.
It differs from traditional small business financing, which is generally referred to as debt financing, which requires regular repayments until the debt is paid off. Equity financing generally ties investor repayment into the operating cash flow of the business, which allows the investors to make money alongside the business and then terminates their involvement in the business when they’ve been repaid a specific return on their investment.
This is all well and good, but you might be wondering when this sort of financing can be best used. Generally speaking, equity financing is fairly time-sensitive, and depends on the needs of the business.
A good (and common) time to seek equity financing is while you’re finding startup capital for your business. Angel investors, a common source of equity financing that specifically seeks out businesses that can offer a high return on their investment, tend to flock to business ideas that are yet to get off the ground.
Equity financing is a good solution to any short-term financing needs that may arise before your business is fully opened and operational both due to its availability and its impact on your finances, making it optimal for coming up with the money needed to do things like find a location, train and hire your staff, and so on.
Another common use for equity financing is to finance riskier businesses. Many banks or traditional lenders might not be willing to take a gamble on a riskier business idea (be it concept, location, or what have you), but equity financing will allow you to get money from outside investors who understand the inherent risks and might not be expecting to make all of their money back.
While it does take time and effort to find the right investor, the availability of financing they can provide can make or break the chances of your business getting off the ground.
Equity financing can still help even after you’ve already been operating, particularly when you want to manage your business’ debt. Unlike other forms of business financing, equity financing isn’t counted into your business’ debt and is repaid much differently.
Granted, there’s always still risks involved – and frankly, it can be a lot more legwork and effort to find an investor that can meet your needs. Even if you are to find one, they can end up controlling how you run your business. Make sure you do your research before deciding on a financing strategy and keep your options open.
Equipment financing is one of the more popular types of small business financing available today. True to its name, equipment financing serves as a method for business owners to pay for equipment they need when they might not have access to the required capital otherwise. Every business thrives on having the right tools at the right time, and equipment financing can allow for flexible access to these tools right when they’re needed most without a lot of overhead or delays.
Even with as self-explanatory as the term might be, we’ve still seen a lot of questions out there about what it can – and can’t – be used to pay for. If you’ve been considering getting additional financing to help your business but you don’t quite know what it can be used for, we’ve compiled a few of the more common uses and needs for equipment financing here:
Not to sound too much like your parents, but the endless march of new technology affects us all, especially small business owners. Computers become outdated, new methods of tracking inventory and reaching customers get developed, tablets get broken, and suddenly your favorite old cash register just isn’t quite cutting it anymore. Equipment financing helps small businesses have access to the latest and greatest in business technology, or at least something newer than what they’ve been working with, and the impact on productivity and your bottom line can be felt almost immediately.
Plenty of people dream of owning kitchens, but not many of them expect all the upkeep and maintenance that goes into it. Between the demands of constant use and the need to maintain government-mandated health and safety standards, many of which revolve around the cleanliness and functionality of things like freezers and ovens, equipment loans are a popular method for kitchens to get the funding to replace that greasy old grill and give their patrons the safest (and most delicious) experience they can while still spending capital on other needed areas of the business.
A lot of people think that equipment loans can be used to purchase new inventory for stores or e-commerce outlets. While the terms of equipment financing wouldn’t meet that need as well as dedicated inventory loans, equipment loans are a great way to remodel storefronts and warehouses. Particularly with the holiday season coming up, expanding your inventory space or allowing for more shelves for products is always a safe decision, and equipment financing allows for that more easily.
Sometimes the benefits of equipment financing come less from what you’re buying as it does how you’re buying it. A business that hasn’t been open too long can use equipment financing to help mitigate the risk and uncertainty that comes with spending a lot of money on a certain asset until you can demonstrate how the asset helps your business through productivity, cost savings, and the like. With less of your own capital tied up in the equipment, you’re at much less risk of purchasing new tools and supplies.
Even after the financing has been provided for new equipment, the regular monthly payments can help a business better plan for monthly expenditures, cash flow, and unexpected expenses that can pop up by providing a set monthly cost for the equipment every month. That way, the next time something needs to be replaced, you’re already in a better spot than you were!