4 Small Business Financing Options
Whether you need to purchase new equipment or move to a new location, almost all small businesses need financing at some point. Consider these four small business financing options.
- Small Business Loan
Most major banks offer small business loans. This option is best for businesses that have been operating for at least two years, are turning a profit, have high revenue and good credit. If your business meets these criteria then this is likely to be the lowest cost financing option for you. However, the process of applying for these loans can be cumbersome and many borrowers may not qualify. Online lenders, such as Lendified, may have less stringent requirements and faster approval processes.
- Business Line of Credit
A line of credit is similar to a credit card. You can use the money from a line of credit for pretty much any business purchase you choose and because your line of credit is approved before you need to use it, you do not need to wait around for a loan to be approved to make a purchase. This makes this option ideal for businesses with seasonal or unpredictable cash flow needs.
Lines of credit come in two varieties. Short-term lines of credit are easier to qualify for and come with shorter repayment periods and lower credit limits. Medium-term lines of credit provide higher credit limits and longer repayment terms at lower interest rates but are more difficult to qualify for. Medium-term lines of credit are usually offered by traditional banks, while short-term options are often offered by alternative lenders.
- Business Credit Cards
Business credit cards are most appropriate for day-to-day expenses, such as office supplies. This financing option is usually easier to apply for than a loan or line of credit but comes with a higher interest rate and lower credit limit. Business credit cards can be useful for covering short-term cash flow needs and providing employees with a means to pay for expenses such as gas, lodging and food while traveling on business.
- Crowdfunding
If you have difficulty getting approved for traditional financing, you might consider crowdfunding. With this method, you use a crowdfunding site to request donations from the public, often in exchange for some type of perk, such as early access to a product.
All businesses need cash flow to operate. If your business needs a cash flow infusion, one of these four funding options may be able to help you get it.
