Types of Business Financing for Owners
Small Business Financing refers to a means by which a current or aspiring business owner gets money from a bank or other source to launch a new business, buy an already existing business or inject capital into an already existing business to fund future or planned business activity. It is also termed as venture capital. In other words, it is a loan that is used for the investment of your business’ capital. The venture capital is usually provided by private companies or organizations and it is typically provided in the form of equity shares. It can be a line of credit or an installment arrangement. Venture capitalists provide businesses with needed cash to fund their growth, start-up costs and commercial activities
There are many options available when you are looking for small business financing. You can obtain a Business Cash Loan, which is provided by private firms; obtain a Small Business Line of Credit, offered by banks; apply for a Business Loan, which can be provided by banks or other private financial institutions; or obtain a Commercial Bridge Loan, offered by banks and some third parties. All these sources of funding have different requirements and they have varying effects on your cash flow and profit. A well thought out application will help you determine which funding option will be best for you.
Your choice of business financing depends upon certain factors such as your credit score, the amount you need to raise, your personal credit limit and the amount you are willing to put up as collateral. You can apply for a business line of credit from your local bank; however, you may have to submit personal credit checks for approval. You may also find it difficult to qualify for a business line of credit.
Another option for business financing is Commercial Lending funds, which is usually provided through banks. The advantage of Commercial Lending funds is that you can get a low-interest rate financing. However, you may need to have good credit score in order to avail of this option. Lenders use your credit score to assess whether you are able to repay the financing or not. If you fail to repay the loan. Then your credit score will come down and you may also be disqualified from the loan.
Private Companies: You may want to opt for private funding for your business. For this, you may want to consult with various private companies offering various financing options such as debt financing, business cash advances, and other forms of capital raising. These companies usually require you to submit collateral for funding and they have terms and conditions for repayment. They are most interested in business owners with small businesses that do not have any immediate cash flow problems and they do not anticipate any significant growth in the future.
Angel Investors: Angel investors are wealthy individuals, typically wealthy individual investors who are willing to invest in your business based on your personal merit. Most entrepreneurs seek the help of angel investors as a means of obtaining seed money and business financing options. In general, Angel investors are difficult to find and you often have to pay a very high amount.
Private Business Loans: For small businesses with less than $75k in annual revenue, there are banks that offer unsecured financing. Most banks will not offer small business loan financing. Because such small businesses usually have no chance of success unless they have high-ticket items like equipment. Most banks focus their loan programs in areas such as commercial real estate loans and consumer credit lines. One disadvantage of applying for a bank financing program is that the bank. It will almost always run a credit check on the business owner before approving the financing.
Small Business Loan: Similar to sba loans, there are many investors that offer unsecured financing for small businesses. This is a good option for those who have a low risk tolerance or do not have a strong credit history. However, private investors are more difficult to find and the interest rates are typically quite high. Typically, an SBA pre-approval is required and most investors will require a personal guarantee before providing capital. Private investors are also very aggressive in pursuing SBA loans and most will require at least a 3% return on investment. We also provide Shipper Corner services.