Finding the right business funding option can be a frustrating process. With so many options available, it’s easy to get absorbed into endless what-ifs and maybe so’s. Regardless of whether you decide to get a loan from a bank, reach out to friends and family for capital, or make a significant investment from a venture capitalist, it will be an important decision that needs careful consideration.
Many funding options are available to entrepreneurs looking to grow their businesses. However, each type of funding has various advantages and disadvantages, which one should know when choosing the best option for their business.
Financing Options for Your Business
Crowdfunding. An emerging, viable option for entrepreneurs seeking capital outside of the traditional financing ecosystem. A variety of crowdfunding platforms offer businesses the opportunity to raise money via donations for equity or rewards.
Grants. It would be best to consider whether you qualify for any business grants. It’s usually worth your time to check out grant programs, even if most are highly competitive and provide smaller amounts than a loan. Businesses can apply for money from public and private organizations and programs based on specific requirements, such as their mission, history, or product.
Term Loans. Bank term loans are a popular choice for businesses that want to expand, acquire companies, or make major investments. An instalment loan usually involves monthly or quarterly payments, a fixed interest rate, and a predetermined maturity date. Their approval standards are rigid as well, and they often require collateral. You can get a business loan from a bank, online lender or nonprofit lender.
SBA Loans. Through SBA loans, business owners have access to bank loans they wouldn’t otherwise have been able to get. In addition, if you qualify for a particular loan product, you can use it for a wide range of purposes at a low-interest rate.
Lines Of Credit. Business lines of credit are like credit cards but have a much higher borrowing limit. With a revolving line of credit, you can take out instalment loans that replenish as you pay them back. The flexible nature of LOCs makes them an invaluable source of financing for both emergencies and long-term projects.
Microloans. A micro-loan may be the best choice for startups and high-quality companies with small financial needs. For example, the Small Business Administration (SBA) offers a Micro-loan Program (restricted at $50,000) that helps new businesses get started. In addition, nonprofit lenders are often a source of micro-loans for underserved entrepreneurs, including minorities and veterans.
Bootstrapping. A means of raising capital mainly through cash flow. The startup sells a product or service with minimal capital to grow the business only from sales. This model has no advantage unless you create innovative software or cost-efficient tools.
Equipment Financing. This is when you are given a specific amount needed to buy the equipment, which you must repay, plus interest.
Inventory Financing. The idea behind inventory financing is the same as equipment financing: It lets you borrow the funds needed to purchase a significant quantity of inventory. It is a great option when you find an excellent bulk deal on sale for a relatively short time, and you need the capital upfront.
We Can Help
Whether you are a start-up or an established company, we can help you reach your funding goals. If you would like to discuss your funding options with an experienced broker, call POM (Peace of Mind) Capital & Funding Services at (631) 354-9290 or write to us at [email protected] to schedule a free consultation with our team.
POM Capital & Funding Services is a leading provider of alternative funding solutions for businesses of all types and sizes, offering commercial finance solutions and products to businesses in the Centerport, New York area and throughout the state of New York.