Small businesses often need capital in order to grow and flourish. While there are many ways to get this capital, one of the best ways to go about it is to have a solid business plan and a solid plan to pay back the money. Investors want to know why they should fund your business, as well as the people and management behind it. Here are the various ways to obtain small business finance. Choosing the best method for your business will depend on your qualifications and needs.
A business line of credit (also called a credit line) provides ongoing access to funds, usually at a fixed interest rate, over a set period of time. These loans can help manage short-term cash needs, such as purchasing inventory, investing in marketing, or managing seasonal fluctuations. Business credit cards are also a good option for small businesses, as they can improve their credit score and provide a way to purchase equipment without having to pay full cash up front. Using these cards can also increase your business’s credit score and help you get access to more rewards programs.
Small-business lenders offer a wide range of financing options, from short-term loans to long-term lines of credit. Interest rates vary, and many lenders are more expensive than others. However, if you’re considering small-business loans, a small-business lender might be the best option for your needs. Credibility Capital, Funding Circle, and Bluevine are some of the top choices for traditional term loans. You can also check out OnDeck for competitive products.
Microloans and SBA-guaranteed loans are another option for small-business loans. Microloans are small loans given to entrepreneurs without collateral and are often used to finance operational costs and working capital. Kabbage and other nonprofit organizations offer microloans and small business loans up to $250,000, and these small-business loans are administered by nonprofit groups. In addition to these, many startups can benefit from nontraditional business funding options, such as working capital loans and real estate loans.
Many small business owners believe that they do not have the perfect credit score, or that their business would have been rejected by a traditional lender. While every lender weighs qualifying factors differently, there is a high chance that you will be approved for a small business loan if you can show that you can repay the money. A good credit history and a history of paying invoices will help you secure a business loan. This type of loan will help your business grow, and is an excellent way to finance your business.
Small businesses can also take out term loans. If you’ve taken out a mortgage or a car loan, you may be familiar with the mechanics of a term loan. These types of loans deliver lump sum capital to a business and then pay it back in fixed installments. The advantage of this type of loan is that it does not require you to surrender ownership. A drawback to this type of loan is that it will also reduce the owner’s income and control over the company.