This guide outlines 7 channels to obtain small business funds more easily. No doubt, there are many perks of owning a small business but when it comes to financial flexibility, businesses can’t have it their way. Even if they try, it’s not that simple. The are many factors involved. Mostly, business accounts do not have readily available cash to pursue every opportunity that comes their way. And, there are multiple reasons for it:
- Customers take a bit longer to clear off the bills
- The operating and overhead expenses increase
- Sudden fall in sales
- New materials and machinery need to be procured
- Miscellaneous costs could eat up even more profit
Though these problems are there to exist, there are also good solutions in the form of small business loans to help meet all the financial needs. These form a bridge between the gap in cash flow and the opportunities. Small business loans can help you to finance absolutely any form of financial requirements like equipment leasing or financing for the customers. You can get them approved very quickly and the repayment options can be personalized. You can also get them at competitive and flexible interest rates.
7 ways to obtain small business funds
Let us explore these different options for small business funds in detail.
Invoice Financing Options
Small business owners often fail to pay their bills, even after having a lot of invoices piled up with them. In such a scenario, it is ideal that without opting for unnecessary business loans, businesses can utilize these invoices for invoice financing. Through this, they will have the payments done in advance even if the customers haven’t paid them yet, and thus obtain small business funds earlier. These services are extremely easy to use. The business owners only need an account that needs to be linked with the invoicing company. The full value of the pending invoices will be sent soon to the bank accounts with flexible repayment schedules.
Invoice Factoring Options
This is a more flexible option for business owners where they can sell their outstanding invoices to the factoring companies at a discounted price to secure small business funds. The factoring companies will then be handing over the cash to the business. This cash will, however, be only a small percentage of the entire invoice value. The receivables due on the business will have the complete ownership of the factoring companies, which means they will be directly collecting the checks from the customers. Factoring might be at times a bit costly financial solution for your company but it is very easy to achieve and utilize.
Traditional Bank Loans
Almost every financial institution offers small business capital loans, although getting one is not always easy. A loan is not available to every firm that walks into a bank. Traditional financial institutions only approve a small percentage of loan applications, and the review process is extremely thorough. Applicants who are fortunate enough to be chosen will benefit from low interest rates. However, one must keep in mind that typical bank processes are more complicated and time-consuming.
Small Business Administration (SBA) Loans
Business owners have the liberty to apply for small business funds that are directly backed by the government. One gets SBA loans directly from the approved SBA lenders. These loans are very different compared to other options as these are available to the businesses which are just opening up. But no matter how lucrative these might seem to be, it is extremely difficult to avail of these loans. It involves mountainous paperwork and one needs to have a great credit history to be able to qualify for this. This loan is very much similar to the traditional loans, for they also need a personal guarantee, to begin with.
Merchant Cash Advance Benefits
Merchant cash advance benefits can be used by businesses which make a hefty amount of credit card transactions. Examples of such businesses are retail units or restaurants. They can use this method to suffice their cash shortage issues and get small business funds. A small sum of money will be paid in advance to the business and a slice of their credit card receipts for about 10% will be taken by the lender. This is just for the time being till they clear off all their dues and repay whatever fees they are charging. The repayment, in this case, is always proportional to the revenue and there is no pressure of mandatory repayment in a specific month.
Easy Business Lines of Credit
It is important to have strong investor relations in order to successfully secure these types of loans. When you apply for a business line of credit, it automatically functions as a business credit card. Businesses can pay their obligations on time each month and reestablish their ruined credit scores. If the company is experiencing serious cash flow problems, this may not be the best option. The last thing you want to do is exhaust your credit line and find yourself without a way to repay it.
Loans from Non-bank Lending Institutions
There are many reasons why banks hesitate to lend money to small businesses. And hence, the businesses approach non-bank lenders to get their small business funds and fill in their financial voids. Between 2014 and 2015, the small business loans taken from alternative sources grew up by about 60% and there was no looking back since then. This is because the application process for these loans is extremely streamlined and the money comes into the hands of the borrowers within 24 hours. There is also no mandatory requirement of having promising credit scores and collateral is also not needed to secure the loans. But, besides all these benefits, this funding is going to cost you a hefty interest.
Conclusion
Don’t let your financial issues come in the way of your business’s growth. Take help of the suitable small business funds options to keep your business on track. With money in your hand, you can focus more on flourishing your business rather than worrying about your cash flow.
