Business Funding Options: How to Get Financing for Your Business

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Are you looking for a way to raise capital for your business and feeling overwhelmed by the options out there? You’re not alone. Most business owners have questions when it comes to funding their businesses. Whether this is your first year in business or you’ve been running your business for years, it’s always a good idea to stay up to date on business funding options. After all, you never know when you’ll need cash to cover expenses or jump on an exciting opportunity.

Let us help make finances a little easier to understand with this comprehensive guide to business funding solutions. We’ll take a deep dive into how financing can help your business, where to find funding and what funding options are available.

How Can Business Funding Solutions Help You?

It’s easy to see how funding is important when you first start your business. You need capital to get it up and running. Like many business owners, you probably started your company with personal savings or a small loan.

Now that you’ve got some experience running your business, however, you might wonder if it’s worthwhile to seek more funding. For a lot of businesses, the answer is “yes.”

There are two main reasons you should look into business funding options:

  • To get through periods of slow cash flow
  • To plan for business growth

Let’s take a closer look at what each of these situations might mean for your business and how you can use business funding successfully.

Combat Slow Periods

Your business usually runs smoothly. But, sometimes, sales can suddenly slow and perhaps an inconveniently expensive equipment repair crops up. Your cash reserves are quickly decreasing and you’re starting to feel uneasy about the future of your business.

If you’re in a slow period, it can be difficult to know where to turn. Fortunately, you have options to help you combat slow periods and get your cash flow back on track. Business loans, lines of credit and other small business funding solutions can help you get the working capital you need to keep your business operating.

Seeking funding is a good option if you’re facing a lack of cash flow from a number of situations, including:

  • Seasonal Slow Periods: Lots of businesses face a busy season and a slow season, such as a lawn care company or a restaurant in a resort town. If you run a seasonal business, you know you need to build cash reserves for the slow season. Unfortunately, despite best efforts sometimes reserves aren’t enough to get you to your busy season. Having funding options in place will help you weather the slow periods.
  • Unexpected Equipment Repairs: Your business uses equipment and technology to help customers. What can you do if your necessary equipment suddenly breaks down? Business funding like equipment leasing lets you replace broken equipment without cutting into your savings.
  • Covering Unpaid Accounts: Few things are as frustrating as waiting on an outstanding invoice. You know your customers will pay by the due date, but inconvenient timing can leave you with little cash for everyday expenses while you wait for payments. Business funding is a good stopgap for times like these.

Grow Your Business

Small business funding is just as important when business is booming as it is when business is slow. Funding options should be a part of your growth plan, whether you’re looking at only the next couple of months or growing your business in years to come.

It’s hard to take your business to the next level without some form of funding. You’ll need to meet increases in demand, hire new employees and invest in new marketing and advertising campaigns.

Give yourself a better chance for successful growth by understanding your financing options now so you can:

  • Manage Employee Needs: As your business grows, you’ll probably need to change how you manage your employees. This includes hiring the right employees and investing in your current workforce to retain the best staff.
  • Expand to a New Location: Whether you need to move to a bigger space or want to open a second location, expansion is expensive. Have your funding ready so you can score the perfect location when it becomes available.
  • Increase Inventory: As you increase your sales, you’ll need to keep your customers’ favorite products on the shelves. To take on more inventory than you have before, be sure you have the funds necessary to purchase and store the products.

Who Can Provide Small Business Funding?

Deciding to seek funding is the easy part. Once it’s time to actually find funding, you might wonder where to start.

There are a lot of ways to fund your business needs, from taking out loans from a lender to seeking investors. Different funding channels will have different requirements to receive funding and pay it back. It’s important to be sure you know what’s required by each source of business funding so you can accurately compare the pros and cons.

Understand who can help fund your business – and their requirements – so you can make an informed decision when you need to raise capital.

  • Traditional Lenders: Traditional lenders offer business financing options like loans. Funding from a traditional lender often gives you straightforward loan terms. A traditional lender can be a good source of funds if you can meet approval requirements, which are often stricter than other funding sources.
  • Alternative Lenders: Alternative lenders are similar to traditional lenders. They offer loans and financing options for your business. Unlike traditional lenders, many alternative lenders have small business funding solutions with less rigorous requirements. This increases the chances of approval for business owners in unique financial situations, such as a business owner who needs a bad credit business loan.
  • Small Business Administration: The Small Business Administration, or SBA, provides business owners with a loan program. Through the SBA loan program, you get a regular loan from a private lender. Your loan is partially guaranteed by the SBA so your lender receives some of the money back if you cannot pay. The program is a great fit if you can get approved, but the requirements are strict and SBA loans aren’t a possibility for every business.
  • Friends and Family: You can get funding through your network of friends and family. However, borrowing from friends or family can be a risky move for both of you. Make sure you’re both on the same page and be sure to sign a loan contract if you use this avenue to fund your business.
  • Business Grants: Small business grants work like a loan, but you don’t have to pay the money back. Most business grants are funded by the government or non-profit research institutions. Does free money for your business sound too good to be true? Securing a business grant is incredibly difficult. Between a large amount of competition and strict application requirements, you might find other funding channels easier, especially for time-sensitive needs.
  • Crowdfunding: You may have heard of crowdfunding as a way to raise donations for a personal hardship or non-profit. Did you know there are options to crowdfund your business as well? You can use crowdfunding platforms to raise capital for your business. Before crowdfunding, be sure to determine what giving to your business implies. You’ll have to give up part of the ownership or your business to investors in many crowdfunding situations.

Carefully consider the benefits and disadvantages of each business funding source. It’s also a good idea to consider your chances for approval and other obstacles to secure funding.

Business Funding Options: What Are Your Choices?

After choosing a source for your funds, you’ll need to look into what options are available. Lenders, for example, often offer multiple ways to secure funds. Get to know the different business funding options you have before you sign up.

  • Business Loans: One of the most common ways to fund your business is by using a business loan. You’ll work with a lender to determine loan terms including loan amount, interest rate and loan length. You’ll need to choose between a short-term or long-term business loan. Short-term loans are best when you’re looking for a quick influx of cash and don’t want to commit to a long repayment period. Long-term loans are generally for larger amounts to fund big projects, like a new office construction.
  • Equipment Financing: Equipment financing and leasing is a way to replace old, worn-out business equipment without clearing your cash reserves. You can use equipment financing to purchase or lease new or pre-owned equipment. Depending on your situation, you could potentially save money on taxes using a special tax deduction for business equipment.
  • Invoice Factoring: Dealing with unpaid invoices? Invoice factoring is a type of business funding that allows you to get cash now for future invoice payments. You work with an invoice factoring company, who pays you a percentage of your unpaid invoice upfront. The company collects your customer’s payment for the invoice. Once the invoice is paid, you receive the remainder of the invoice, minus the fees from the invoice factoring company. Invoice factoring could be a good option if most of your clients pay on a delayed payment schedule.
  • Merchant Cash Advance: A merchant cash advance is a business growth fund that gives you an advance payment on your future credit and debit card sales. Unlike regular business loans, merchant cash advances don’t have a set repayment schedule. You’ll pay a percentage of each credit card sales to your cash advance lender. Merchant cash advances work best for businesses that have a lot of card transactions. If your business deals mostly in cash or checks, a merchant cash advance may not be the right business funding option for you.
  • Business Credit Card: You probably have a credit card for personal use. Business credit cards work in the same way as your personal card. If approved for a business credit card, your card issuer gives you a credit limit. You can make purchases on your credit card up to the credit limit. When you pay your credit card bill, you reduce the amount of credit used and free up available credit. Business credit cards generally require good credit for approval.
  • Business Line of Credit: Like a business credit card, a business line of credit gives you access to revolving credit. That means as you pay off what you’ve used, you can access that credit again. As long as you pay down your balance, you’ll usually have credit available to you. Lines of credit often come in lower amounts than business loans.
  • Bartering: Did you ever trade snacks during lunch in elementary school? Perhaps your friend gave you a pudding cup for a bag of your favorite chips. You might be able to use this general method in your business as well. For example, if you run a bookkeeping firm and need a website for your business, consider swapping bookkeeping services for a new website with a designer. Before you try bartering services, be sure you actually need the bartered service. You should also consider speaking with your tax advisor to make sure there are no tax consequences of your trade.

Determining Business Funding Solutions to Fit Your Business

Choosing the right source and type of financing for your business makes a big difference in helping your business be successful. After carefully considering the available options, you should look at what makes the most sense for your business.

Make the Most of Your Financing

Whether you need funds because cash is tight or you want to take advantage of an opportunity, there are things you can do to maximize the effectiveness of your funding.

Follow these tips to help beat cash flow crunches and capitalize on growth opportunities using business funding:

  • Make a Budget: You know you can use a budget to keep business finances on track. Most businesses use a yearly or quarterly budget – but did you know you can get even more specific when budgeting? If you find yourself having cash flow issues, narrow down your budget into monthly or daily spending categories.
  • Balance Inventory Needs: If you carry sales inventory or need to keep stock of supplies, it can be difficult to balance your needs, especially during a busy season. Keep track of your inventory and supplies throughout the year to help you determine how much to keep on hand. Remember to update your numbers as you grow your business and increase sales.
  • Stay on Top of Invoicing: It’s easy to accidentally forget to send an invoice after you complete work for a customer. You’re busy, so getting around to invoicing is the last thing on your mind. You send your invoice a few weeks later, and your client then has a month or two to pay, leaving you without cash from the work for several months. Reduce the time it takes to get paid by sending out invoices as soon as work is completed.
  • Track Business Sales: Tracking sales data can help you staff your office when you need it most. If you keep a set number of employees in your shop or restaurant at all times, there are bound to be times when no customers are present. Employees are left with little to do and can’t help your business make money. Look at your sales data to see when your business is most busy and you need more staff on hand.
  • Find Business Funding Fast: Ever find yourself needing cash for your business fast? Some business funding options often take several weeks to get money to your account. On the other hand, options like a business loan from an alternative lender can get you the cash you need quickly. Some lenders can even get loan funds to you in as little as 24 hours.

Financing Options for Your Business

Every business is different. Take the time to find a business funding option that works best for your business. Things to remember when choosing a financing option include:

  • Industry: You want to work with a lender who understands the needs of your industry to offer industry-specific business loans.
  • Credit Score: When looking for funding, your credit score could be a big factor. If your business doesn’t have business credit, you’ll probably have to use your personal credit score. Some financing sources offer loans for people with bad credit.
  • Special Interest Groups: If you’re a veteran, woman or minority business owner, you can look for lenders who serve special interest groups. These lenders can help you find a loan that helps you meet your unique business challenges.
  • Lender Reputation: You want to make sure your source of business funding is reputable. Look at reviews from actual customers and BBB ratings to help you get a better idea of your lender’s reputation.

Compare Small Business Funding Options

There’s no one-size-fits-all solution when it comes to funding your business. Always take the time to research your options and compare funding sources to find the right fit for your business. You’ll enjoy a higher chance of approval and more satisfaction out of your business funding.

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