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Funding Small Business Growth: 5 Options to Consider

funding small business growth

So you want to run your own business, and you’ve even got a solid business plan documented and ready to roll out.

Great! Now the only thing you need is the capital to get the business started.

There are tons of reasons why you would need extra capital for your business:

    • Paying your lease
    • Advertising and marketing expenses
    • Paying employees
    • Buying inventory
    • Purchasing equipment
    • Expanding the business
    • Covering for seasonal lows

All these things take money. But what if capital is short? Like other business owner hopefuls, heading to the bank is usually the first step in getting the funds needed to start and grow a small business.

Unfortunately, many entrepreneurs discover the hard way that a certain amount of criteria is necessary to get approved for traditional bank loans, including good credit, lots of collateral, and a lengthy history in business.

For all those who don’t exactly match this picture, there’s good news – there are alternative loan options for funding small business endeavors that you can look into instead.

Here are 5 options to consider.

 

1. SBA Loans

The Small Business Administration (SBA) is committed to helping small businesses get the funds they need to succeed at business. While this organization doesn’t loan money out directly, it backs lenders who choose to offer these loans, thereby boosting the lenders’ incentive to offer loans to borrowers.

Advantages:

    • Long repayment terms
    • Low down payments
    • Multiple programs available

Disadvantages:

    • In-depth paperwork
    • May require collateral

 

2. Business Cash Advance

If you’re unable to qualify for financing at a conventional bank, a business cash advance can be an option for you. This funding program is a great solution if you’ve got little or no collateral, bad credit, and a limited business history. It’s also great if most of the sales you make are paid for via credit cards.

With a business cash advance, a lender gives you the funds you need to meet a variety of business expenses. In order to pay back the money, you allow the lender to take a portion of your daily credit card sales until the entire amount is paid off. The payments you make will fluctuate depending on the level of your daily sales.

Advantages:

    • Bad credit is OK
    • Quick access to funds
    • Easy and fast approval process

Disadvantages:

    • Higher fees compared to other alternative loan options

 

3. Business Line of Credit

Many small businesses can qualify for a business line of credit without having to meet a number of typical borrowing requirements that conventional lending institutions necessitate. With this program, you are given access to a certain credit amount from which you can withdraw as much or as little as you need (as long as you don’t go over your allotted limit).

You are required to pay back the amount of money you withdrew, and are only responsible for paying interest on the portion withdrawn. This money can be used again and again after the funds have been put back into the account.

Advantages:

    • Only pay interest on money withdrawn
    • Money is available when you need it
    • Bad credit is OK

Disadvantages:

    • May require collateral
    • Higher interest rates charged with lower credit scores

 

4. Equipment Financing

Equipment is necessary no matter what type of business you’re in. But if money isn’t readily available to buy it, or you simply don’t want to disrupt your cash flow to pay for it, equipment financing can be the perfect solution.

 

Much like a car loan, a lender forwards you the money you need to buy the equipment. You then pay it back according to the terms of the lender within the specified time frame, after which the equipment is considered all yours.

Equipment financing can be a great option if your credit rating is less than perfect, as the equipment collateralizes the loan.

Advantages:

    • Quick access to funds
    • Equipment serves as collateral
    • Helps build credit
    • Bad credit is OK

Disadvantages:

    • Equipment may be obsolete by the time you pay the loan off
    • Could tie up credit, preventing you from applying for other loans
    • Requires additional expenses, such as maintenance of the equipment

 

5. Invoice Financing

Many small businesses feel the effect of waiting for invoices to be paid after they’ve been sent out to customers. In the meantime, you still need to pay a variety of bills, which require capital to cover them. But if you depend on the payment of these invoices as access to the cash, you could wind up in hot water.

This is where invoice financing can help. With this program, you sell the invoices to a lender, who will then offer you the majority of the funds you require. The rest of the money is kept in a reserve fund. After the invoices are paid, this money is then freed up to you, minus the lender’s fees.

Any small business that operates on a B2B business model may qualify for invoice financing. The maximum amount of money you can qualify for will depend on the total number and quality of your invoices.

Advantages:

    • Fast access to cash
    • Bad credit is OK

Disadvantages:

    • Higher fees compared to conventional loans

 

Which Loan Option is Right For You? Let Credibly Help

The number of loan options available can be a bit daunting to navigate. Which one is right for you?

Depending on your specific needs and financial situation, the choice you make for funding small business growth will vary compared to others. That’s where Credibly comes into the picture – with our help and expertise, we can help you identify all your options, and guide you in the direction of the loan options that makes the most sense for you.

For all of your modern business funding solutions, contact Credibly today!