Did you know that there are approximately 30 million small businesses in the United States?
While many companies can bootstrap their way to success, others rely on financing to reach their goals.
If you don’t have enough personal savings to finance your business, here are five other options to consider:
1. Term Loan
As a traditional business loan, you’ll work directly with a lender to secure financing. The terms and conditions of the loan are based on your credit history and score, as well as your requirements.
Before choosing a lender, you’ll want to have an idea of how much money you want to borrow, any fees you should be aware of when choosing a lender and have an understanding on current interest rates. With some of that research in place you’ll be able to get insight on the length of loan that works best for your business needs.
A term loan is a good place to begin your search for financing, as there are hundreds of local, national, and online lenders willing to help.
2. SBA Loan
The U.S. Small Business Administration (SBA) works directly with lending partners to provide SBA-guaranteed loans to many types of businesses.
While the SBA doesn’t issue funds directly, it guarantees repayment should the business fail. This guarantee allows banks to make riskier loans to companies that don’t qualify for other forms of financing.
3. Business Line of Credit
Unlike a business loan, a business line of credit allows you to secure financing that may not be immediately needed.
For example, you can receive a line of credit of $50,000, but there’s no requirement to access it. You can draw funds from the line of credit as needed, thus making payments only on what you borrow, as opposed to the entire amount.
A business line of credit is best for companies looking to improve cash flow management and/or deal with unexpected future expenses.
4. Business Credit Card
A business credit card works in the same way as a personal credit card, with the only difference being that it’s used for company expenses.
There are many benefits of a business credit card, including:
- Hundreds of offers to choose from
- Competitive interest rates
- Simplified application process
- Opportunity to earn cashback or rewards for the money you spend
If you don’t require a large sum of money, a business credit card may suit your needs.
5. Equipment Loan
Depending on your industry, you may be looking to borrow money to purchase, upgrade, or replace equipment.
Rather than opt for another type of loan, it’s best to use one designed specifically for this purchase. This is particularly important if you’re purchasing expensive equipment, such as that for a restaurant, farm, or construction company.
While equipment loans typically require a down payment of 10 to 20 percent, flexible terms allow you to settle on a payment that fits your budget.
With so many ways to finance a small business, it’s important to compare the pros and cons of each option.
Once you have a clear idea of what’s available and what you need, it’s easier to make a confident decision on what to do next.