Whether just starting a business or looking to expand, it may be necessary for you to secure funding.
There are a number of small business funding options that can help take your business to the desired level, but many business owners may not understand the best way to get funding.
Small Business Funding Options
Small business loans are one of the best ways for a business to get funding that can help cover payroll, invoices, or other expenses while dealing with a cash flow shortage or increased demand.
Below are five of the must-know small business funding options.
1. Line of Credit
A line of credit is a great option for small businesses because it works very similar to a credit card.
With this loan option, you’re approved up to a certain amount that you can borrow against but when repaying, you only pay interest on the amount you used. This gives you the flexibility to use as much or as little as you need at any given time.
2. Equipment Loan
An equipment loan is a great option when you’re looking to purchase specific equipment for your business. Equipment can be used to streamline processes, bolster efficiency, and increase revenues but can be very costly depending on the need.
This loan gives you the ability to procure what you need to take your business to the next level.
3. Invoice Financing
When your customers have outstanding invoices and you need to pay your bills, invoice financing can provide some relief. With this short term loan, you’ll be asked to provide receivables details in order to obtain funding to cover the gap. While you’re paying to have cash on hand, you’re able to pay your own bills until your customers pay theirs.
4. CDFI Loans
Community Development Financial Institutions (CDFIs) are lending firms that help low-income people and communities obtain funding when they may not from traditional funders. Loan terms are often affordable and reasonable for the people or community receiving the funding.
The intention behind these types of loans is to help those people or community organizations bring positive economic change to their communities.
5. SBA Loans
If you’re not sure you’ll be approved for a loan, whether due to lack of proof of concept or minimal sales, SBA-backed loans are a great option for small businesses.
Essentially, the U.S. Small Business Administration (SBA) will vouch for you with a lender in ensuring the funds will be paid back. Since the SBA is guaranteeing your loan, you may receive benefits like better payment terms, lower percentages, and flexible requirements.
Now You Know How to Secure Funding
Understanding which loan is right for your business and how to find lending options can be a challenge.
Make sure to do your research into the different small business funding options to determine which one best meets your business needs. Then, work with a company to apply for the loan or loans you need and compare rates from competing lenders.
For more advice on running your business, browse the rest of this site.