Are you a startup or want to grow your business? There are many sources to look for finances. According to 2021 statistics, 56% of small businesses went for financing. Most of them did this for the following reasons:
- To expand their businesses.
- To grab a new business opportunity.
- Acquire other business assets.
Most business owners may underestimate how much their business needs in the initial stages. Thus, you may find that all you had in your savings ran out, and the only choice is to look for a loan. So, what should you do in such an instance?
Well, there are several sources of getting the required financement capital. Our guide below provides the best sources in the current industry. Let’s find out!
1. Non-Bank Small Business Lender
The non-bank small business lender is an easy way for small businesses to get loans. Applying for the small business loan allows business owners to access reliable and on-demand capital. You can borrow what you need and access the cash in your account quickly.
Once you sign up for the business loan, you’ll be able to set your pre-approved limit. The limit is then updated monthly, depending on your business performance.
You can draw any amount you need within your limit. Most importantly, there are no hidden charges. The interest rate is also fixed. In this case, the application process features simple steps. You need to open a bank account online to secure a connection. Afterward, the lender will let you know how much you can get considering your credit score.
Aside from term loans, accessing small business loans can also refinance your current business loan. Ensure you discuss your business needs with a financial officer at any bank or credit union. They will review your business proposal and decide on your loan application.
There’s also a flexible repayment period within the business owner’s terms. When it comes to interest, there’s no fixed rate. It depends on the borrowed amount. However, bear in mind that small loans usually carry higher interest rates.
2. Bank Loans
Banks are your best source for any financing you want, including:
- Term loans
- Working capital
- Real estate
Mostly, the process of acquiring working capital from a bank is tedious and lengthy, depending on the type of loan you want.
However, your credit score should come to your rescue. Typically, most banks don’t agree to offer bad credit loans.
Therefore, you have to convince the bank that your business can make money required for the repayment and interest—the only way out is building a solid credit score.
Still, banks ask for an assurance of loan repayment by getting individual guarantees on personal assets. A significant advantage of going for a bank loan is the repayment flexibility. If able, you can pay the loan early before the agreed period elapses and terminate the agreement.
Moreso, you can still take a second loan. This is possible whenever you have paid off a portion of the initial balance. You should also have a good track record of timely loan repayments.
3. Angel Equity
When your business hits rock bottom, the only possible way up is through equity financing. Selling a part of your business is a risky move requiring utmost caution. You also need thorough research to find an ideal investor.
First, look for a willing investor with a good deal. It should be suitable financing that will enable you to remain operational. A small business with potential can attract greedy investors that offer much more than you want for a bigger share.
Also, the investor must have a good reputation and relationship with other investors. This is for credibility purposes. Besides, building your network and receiving advice from experts go a long way in enhancing your business.
4. Friends and Family
If you have a solid circle of family and friends, they can always help pick you up financially. Besides, what’s better than having a family member or friend offer you small loans for your business compared to a stranger?
The good thing with friends and family is that; they might hardly need you to follow strict repayment requirements. Usually, borrowing from other sources may force you to pay immediately.
However, family and friends will often trust you to pay when ready. Still, you should respect and meet your end of the deal. Paying your debt as agreed is beneficial to maintain good relationships.
5. Negotiations with Suppliers
Does your business rely mainly on the supply chain? If yes, you are in an excellent position to negotiate with your suppliers on favorable payment terms. Funds to pay off suppliers can be tricky to find, and you don’t want to close down the business. So, what should you do?
If your customers take longer to pay for the goods and services, you could try to have the same long payment terms with your suppliers. This way, you won’t have to dig deeper into your pockets to settle suppliers and run short of working capital. There are multiple cash handling equipment supplier that may be able to do this.
Ideally, you can also discuss discount terms when you pay your suppliers earlier than expected. Remember that the only way to go for this type of financing is to have a good relationship with your suppliers. Only then will they listen to you.
6. Leasing Equipment
Does your business require a significant investment in assets like machines and computers? Consider leasing instead of buying them.
When you lease, your business makes partial and prolonged payments instead of making the full payment at once. This way, you can use some money for other investments. Thus, you can keep generating money to ensure timely lease payment.
Bear in mind that leasing is a better option for your business if it can’t do without the assets. This means that your business should only lease an expensive machine if operations solely depend on it.
7. Government Funding
Looking for capital funding from the government may be overwhelming. Most times, it’s like a mystery; it’s there, but you can’t find it. Still, businesses find it hard to know if they are even eligible for the loans.
Luckily, if you can’t visit government institutions to start the process, online tools can help. Still, some business projects get government loans easier than others. This is especially true for those that deal with innovations. You might want to rethink a business idea that takes this route if you’re looking for government funding.
Additionally, repaying government loans is a light load on the shoulders. Most offer a grace period to settle and start getting your projected ROI. This way, they’re sure you’ll be repaying effortlessly. The interest rate is also very competitive!
Indeed, there are many ways to finance your business. We have discussed the 7 best sources that can benefit your business’s financing.
So, take your time to research the sources that can work well for you. That way, you are confident to choose a credible source of funding. And, in return, it will benefit your business’ growth and success.