Top 10 Sources of Finance for Small Businesses
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One of the challenging issues that emergent businesses face is the lack of adequate capital to fund their operations. According to Pret Commercial small businesses can still find a wide range of financial arrangements to kickstart and finance day to day activities. Here are sources of capital they may consider.
1. Business Line of Credit
The form of business finance allows you to access the capital as many times as you want-it's a revolving fund. To qualify for this loan, you need to have a $50 000 annual turnover and a higher credit score, ideally 560 and above. Also, you'll need to provide personal collateral security to guarantee the loan when you default. Two advantages of this financing are that it's available quickly, in a week or two, and you can borrow between $1000-$500,000.
2. SBA Loan
The Small Business Administration is a federal agency that helps small businesses to get funding and resources. The agency isn't the lender but a guarantor to financial institutions to lend you money. With this loan type, you can access any amount between $50,000 and $500,000, which is payable from 10 to 25 years. Although the paperwork takes longer, SBA offers a wide range of loans to micro-businesses.
3. Short-term Loan
If you're hard-pressed for time and want a loan at the speed of lighting, you can apply for the SBA Express Loan. It can take less than 24 hours for you to have the money, and you can borrow up to $50,000. However, you must repay it quickly between 1-3 years.
4. Business Term Loan
It's suitable as working capital for acquiring equipment, expanding your business operations, recruiting more staff, etc. You can get $5000 up to $2 000,000 in a couple of weeks. The repayment period ranges from one to five years, and the interest rate is quite low.
5. Merchant Cash Advance
Merchant Cash Advance is a flexible form of business finance because it allows you to borrow against your future income. You'll need to authorize the lender to deduct a certain amount of your daily credit bank deposits. The minimum you can access is $5000, going up to $200,000 as the maximum capital. Since you can get the funds in under 24 hours, the interest is pretty high.
6. Business Credit Card
As the most-user friendly loan, you can use a business credit card to borrow amounts up to $ 500,000 with little paperwork. It's possible to get the money within two weeks, and if your credit score is 680, you're a good candidate.
7. Equipment Financing
Equipment financing provides capital up to $5,000,000, and you can use it to purchase any useful resource for your business. The loan's approval and processing are less than 24 hours, provided your business has been generating a $50,000 annual turnover, and you've got a 650-credit score. If your credit score is low, you can still apply for the loan as long as you have a water-tight financial statement of your three to six months earnings.
8. Commercial Mortgage
With this type of loan, you can expand your retail space, acquire a warehouse, or venture into another business. It also allows you to buy a piece of land and build your property. Although you can access between $250,000 to $500,000 as loan capital, the amount you'll get depends on the property value you'll provide as collateral security and your credit score.
9. Accounts Receivable Financing
Also called factoring, it provides you with capital based on your unpaid invoices by your clients. With this arrangement, you need to sell your receivables or purchase orders to the financing company. It's also possible to receive more than 80 % of your purchase orders within three days of your application.
10. Start-up Loan
As a new business owner, you might find it an uphill task to secure a loan because of non-existent revenue and a solid balance sheet. A start-up loan can be your savior as you can borrow from a minimum of $ 500 to $750,000 as the maximum amount. One good thing about this loan is that you can get the money in a couple of weeks.