There are a number of ways to fund your business.
Small businesses have several financing choices beyond traditional bank financing that may help maintain a steady, positive cash flow.
Different financing options suit different situations. The “right” kind of financing varies depending on the purpose, the amount your business needs, and whether you need short-, medium-, or long-term financing. Here are a few options that you might want to consider.
Seller financing:
Sellers of big-ticket items like real estate, large equipment, or vehicles sometimes offer financing directly to the buyer. The financing may sometimes come with sales incentives, such as 0% interest for a specified period of time or lower sticker prices.
Factoring (accounts receivable financing):
This is a way to get the money from your business’s accounts receivable earlier by selling an invoice to a bank or a finance company in exchange for a percentage of the invoice amount. The factoring company will generally take a percentage or fee, resulting in your business receiving an amount lower than the face value of the invoice. This can be an option if your business is in need of immediate cash flow.
Online only lenders:
There are a growing number of online only small business lenders offering a variety of loan products. Peer-to-peer (P2P) lending is an example in which online platforms connect businesses with investors willing to buy or invest in the loan.
Bank loans:
This is the most common form of small business financing. There are various kinds of loans which can be short- or long-term depending on the purpose, such as the Small Business Administration’s loan programs. Once you’ve settled on an option, be sure to review tips on how to strengthen your application. Besides hard numbers like balance sheet and personal income, lenders also consider your business plan and career background.
Personal financing:
It can be difficult for a new small business to obtain financing when first starting out, so many small business owners use personal funds, personal credit cards, home equity, or personal lines of credit in order to get established. If an application was turned down, it’s advisable to find out why in order to improve and apply again.
Community development grants or loans:
There are nonprofits dedicated to helping small businesses by providing small loans and grants, usually backed by donations or government funds. Grants are funds awarded by government agencies or other organizations and don’t need to be repaid. They are typically designed to help certain types of businesses.
Take the next step
Want to learn about what financing options are open to you and your business? Make an appointment to talk to a banker. Want to learn about what products are available to help you reach your goals? Explore products and services that are tailored to your business needs.
