Small Business Working Capital: 6 Options to Consider
Working capital is essential to business growth, as it enables owners to invest in marketing outreach, employees, and expanded product lines. If you ever hope to compete with other stores on the block, offering the highest quality products and services is imperative. To meet these needs, you’ll need a constant flow of investment capital. Fortunately, there are a variety of small business working capital solutions, so you can grow your business easily and attract more clientele.
1. Private equity investors: To be eligible for private equity investments, you need to provide investors with a well thought out business plan that details your exact plans to launch the business, how you expect to create returns, and a detailed timeline for when you expect the returns to be made. Investors seek a portion of your future profits in exchange for their loan and are often willing to provide large investment quantities in order to maximize their earning potential.
2. Microloans: Microloans are small loans, often of $50,000 or less, that are provided to small business owners as initial startup costs, expansion costs, or to cover operational expenses. They are long-term loans with repayment plans averaging about 5 years, providing small businesses with ample time to generate needed returns for repayment. Interest rates vary among lenders but are often kept low in order to cater to a wide range of aspiring entrepreneurs.
3. Online loans: To cover routine business costs or emergency expenses, online loans provide the ideal option. Qualifications are minimal, making them a good choice for entrepreneurs who have been denied other loan options. With applications approved in as little as 24 hours, and money received shortly thereafter, it provides a convenient funding option when you need money in a pinch.
4. U.S. Small Business Administration (SBA): For business owners who lack sufficient business credit or are having difficulty qualifying for a traditional bank loan, the SBA can help you secure the funding needed to launch or expand your small business. To qualify, you need to provide your business plan, financial history, proof of citizenship, and operate a classifiable small business. Collateral is negotiated on a case-by-case basis, but you are often expected to secure the entirety of the loan.
5. Business line of credit: For established businesses, a business line of credit can provide you continued financial security when times are rough. It will enable you to have funds available to cover regular monthly costs as needed, as well as have an emergency fund on hand when you’re strapped for cash. For new business owners or those with poor credit, you will need to secure the line of credit with an equivalent amount of collateral.
6. Crowdfunding: Crowdfunding is an effective method of sourcing all the funding needed to launch your small business. Crowdfunding is a method of pre-selling products or services to get the capital needed to launch your business. This provides a way of obtaining the necessary startup funds with no collateral. However, it entails a degree of risk, as you will need to ensure you have products available to compensate for all the pre-sold items.
Whether you’re an up-and-coming entrepreneur or an established business person looking to expand your operation, you’ll need consistent and reliable funding options to meet your working capital needs as you invest in the future of your company. Prior to choosing a loan option, consider your individual qualifications as well as your desired interest rates and repayment terms. For modern business funding solutions, contact Credibly.