10 Best Business Financing Options
Your business has many opportunities to obtain financing. Here are the 10 most popular types of business financing that you might want to explore when you’re trying to grow.
SBA Loans and Traditional Bank Loans
Traditional bank loans are a good way of business financing for a variety of purposes. SBA loans are simply a subtype of traditional loans, backed by the government. They’re highly competitive but have many advantages for small businesses.
Credit Card Financing
For short-term needs, you might want to turn to a credit card. The important thing is to make sure you can pay the card off to avoid high interest charges and other fees.
Business Line of Credit
A line of credit can be a beneficial type of business financing in your back pocket. You only use it when you need it. Once your draw is paid back, you have it available again.
If you need expensive equipment, talk to your lender about programs that let you finance it. Alternatively, the company selling you the equipment may offer financing.
Merchant Cash Advance
If you have a lot of credit card sales, you might be able to use them to obtain an advance against future sales. The lender gives you a lump sum. Payments are made by ACH transfer based on your daily credit card transaction.
With accounts receivable financing, you receive a percentage of the invoice from the lender, who waits for the customer to pay the invoice. The lender takes a flat fee, but you don’t have to wait for the customer to pay.
Similar to factoring, invoice financing is an advance on your invoices. However, you can receive 100 percent of the invoice without affecting your relationship with your customer.
Purchase Order Financing
With purchase order financing, you get an advance of cash against the value of a purchase order. The PO has to be firm, but you can use the funding to purchase materials or inventory to fulfill the order.
Many small businesses are turning to lending sites that let businesses obtain loans from private investors. Use a reputable marketplace that will manage the transaction. Although it will take a fee, this type of business financing can be beneficial if you don’t have other avenues.
With crowdfunding, your business doesn’t get a loan, but you do get money in return for something from your business. It might be early access to a product or service. If you can garner interest, it’s possible to raise thousands of dollars.