Funding Options for Small Businesses

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Getting a small business into a position of success requires sacrifice internally and mutual agreements with outside entities, the latter often deciding the rate at which your operation can grow. When seeking solutions for funding a small business, owners have many options to choose from. The right choice depends on what you have to offer and what a lender or other types of funding deem a risk worth taking.

Whether it’s to jumpstart production, expand operations, or take in new hires, funding your small business requires researching the solutions that fit your business’s immediate needs. Here are several options out there for small businesses in need of funding.

Crowdfunding

Businesses in the unique position of developing a new product or app can try their luck at crowdfunding their projects online. This is a viable option for businesses that already have a major presence online and can deliver upon promised gifts for those who donate to their cause. Again, this is only for a small minority of businesses and shouldn’t be considered as a funding solution for hiring employees or paying back current debt.

Invoice Purchasing

With Invoice Purchasing, small businesses can use their accounts receivables for funding. Businesses will choose this option if they are just starting out and need to expand operations quicker than anticipated.

Short Term Business Loans

Short-term business loans are for, you guessed it, short term financial support. Under most circumstances, the loan must be repaid in a year or less and will be tied to a fixed interest rate. This is great for businesses that can’t afford to make long term plans under current circumstances.

Receivables Line of Capital

B2C (business-to-consumer) operations can take advantage of capital similar to a line of business credit. Businesses can decide on how they receive funds, whether that be a lump sum or in payments. Only certain companies will offer this service since it offers such flexible options for getting funds and paying off the credit used.

Merchant Cash Advances

A business may prefer a payback option that ties more closely with their sales volume, in this case a merchant cash advance is ideal. Over the course of 12 months, the lender will take a percentage of a business’s credit card sales in exchange for a lump sum payment.

Inventory-Backed Loans

Inventory-backed loans can help during times of financial hardship, but not every lender will be open to the idea of lending your business money. Using your existing inventory to secure funds is a good idea if you know that your product can be turned around quickly, but since the loan depends on the type of inventory you have, this won’t work for every business.

It's important to understand that there are no simple fixes when it comes to your business’s financial struggles, and it’s the promise of these that can lead a business into the ground. When searching for a lender, look for someone who will partner with you to grow your business and not hinder its growth.

 

Daelyn Fortney - Main