Chat with us, powered by LiveChat

Are you thinking about small business financing options for your venture? Perhaps you need some funds to improve cash flow, support expansion, or invest in new stock. There are lots of different funding options to choose from and numerous factors to consider. For some business owners, the prospect of seeking funding, researching the myriad of choices, and making applications can be daunting. But with a little inside know-how, you can avoid all that hassle and skip straight to the good part – receiving the cash. In this article, we summarize the many small business financing options available, how to decide which is best for your needs, and why Strategic Capital is a smart choice.

Different Ways To Fund A Business

There are many different ways to fund a business. As the internet and digital technology continue to evolve, there are an increasing number of options to choose from. Let’s start by looking at an overview of the most popular small business financing options that are available.

·         SBA loans – supported by the Small Business Administration, these have lower interest rates but can be hard to qualify for.

·         Business loans – available from the traditional big banks and innovative online lenders, these are best for small business owners who need larger sums over a longer period.

·         Business line of credit – helpful for newer businesses that need to access funds while building up a credit history.

·         Invoice financing – sometimes known as invoice factoring, this is helpful for businesses whose cash flow is negatively affected by waiting for clients to pay.

·         Business credit card – useful for brand new startups with zero trading history to pay for smaller expenses.

·         Equipment financing – available to purchase equipment, machinery, and tools, with the items being used as collateral.

·         Angel investors – can provide a cash injection for new startups but usually involves relinquishing ownership of shares in the business.

·         Crowdfunding sites – ideal for businesses targeting end consumers as they generate buzz, establish demand, and produce funding when successful.

·         Grants – may be accessible for businesses that fit specific criteria.

·         Friends and family – could be willing to fund your venture but can cause tension and added pressure.

Each of these small business financing options has its own pros and cons. Depending on your trading history, financial situation, and industry sector, you may find that some are more suitable than others. There are even niche products such as restaurant and retail business loans that are dedicated to specific company types.

Key Factors To Consider

When looking to finance a business, it’s important to choose the right funding option for your situation. This will ensure that you access the cash you need for the duration that’s required and at the cheapest possible rate. The purpose of your borrowing will dictate the available options up to a certain point. For example, equipment financing can only be used to purchase or hire machinery and tools. But there are also some key factors that need to be universally considered whatever type of small business financing you’re interested in. These can be summarized as:

·         Eligibility criteria

·         Affordability

·         Application process

·         Funding speed

·         Company values

Let’s dive into each of these in a bit more detail.

Eligibility Criteria

Different lenders will have varying eligibility criteria for their financial products. If you don’t meet the minimum qualifying criteria for one that doesn’t necessarily mean you’ll be ruled out by others. For example, a traditional bank loan may require a personal credit score of 720 or above but at Strategic Capital, we’ll consider people with 650 or over. You may find that some lenders will only consider businesses that have been trading for a fixed amount of time. For loans, this tends to be 2-3 years but for merchant cash advances this can be as little as 6 months. Understanding the eligibility requirements will help you to identify which options your business is most likely to be accepted for and where to focus your efforts.

Affordability

It’s also important to consider the affordability in both the short and long term. Whenever you finance a small business venture or new initiative, you need to be confident that it will generate enough returns to repay what you’ve borrowed (and more). Whether you’re selling a product or service, it’s vital to understand what the return will be and whether it’s sufficient to meet monthly repayments.

In order to do this, you’ll need to calculate the total cost of the loan. It’s not enough to simply look at the interest rate as it’s the duration of the loan that will dictate the actual cost. Read the terms and conditions carefully so that you’re aware of any setup fees or repayment charges in advance. Total up the entire amount so you have a clear idea of what you’ll be paying overall. Then look at the monthly repayment amounts to ensure they will be affordable (especially in the initial stages when things are just getting off the ground).

Application Process

What is the lender’s application process like and how much paperwork is involved? Applying for small business financing can seem like a long and complex task which is often made more difficult by complicated application forms. Some lenders require reams of supporting paperwork which can take a long time to source. However, not all lenders use the same system – online funding partners usually offer a digital application process that’s simple and streamlined. This reduces the time and hassle involved with securing funds, leaving you free to focus on other things. Understanding the application process upfront can help you to avoid the time-consuming and heavy-duty options in favor of the quick and easy ones.

Funding Speed

How long will it take to access the funds you need? If you have a short deadline or urgent funding requirements, then an SBA or traditional bank loan may not be the answer. These channels are renowned for taking months to complete and having low approval rates. If speed is an important factor for your business, then an online lender may be more suitable. Modern funders like Strategic Capital utilize the latest digital processes to screen and process applications. This enables us to cut out many of the time-consuming and labor-intensive steps that traditional banks still follow. By leveraging the newest digital technologies, we can give you a decision quickly and then transfer the funds almost immediately. At Strategic Capital, we can often tell you whether you’ve been approved the same business day and give you quick access to funds in less than a week.

Company Values

Do the lender’s values align with your own? How do they evaluate which businesses are worth funding? Will they treat your application as a number or consider it on its own merits? When financial institutions make decisions that are purely based on numbers, they fail to see the big picture. Looking at a small business in these black and white terms doesn’t allow them to see beyond the paperwork. We prefer to consider each business on its individual merits as this helps us to see opportunities for growth and investment. By looking at each customer individually, we can also advise them on the best funding options for their situation.

By considering each of these factors, you’ll be able to find the right financing for your business needs. Explore the different options to gain a good overview of the funding paths that are open to you. Understanding the various eligibility criteria and affordability will help you narrow down your choices to the most appropriate ones. Looking at the application process, funding speed, and company values will help you find a solution that meets your specific needs. Factoring all of these elements into your decision will ensure that you find the most competitive and well-suited financing for your business.

Business Financing from Strategic Capital

Strategic Capital provides small business financing to a wide range of companies across the USA. Whether it’s to pay for your everyday costs, emergency repairs to equipment, or investing in expansion, we offer business finance solutions without the hassle of traditional banks. Best of all, you’ll benefit from competitive terms and a simple application process, so you’ll soon have more money to reinvest into your business.

Transparency, innovation, and expertise are the driving factors behind everything we do. With a talented team of advisors, a plethora of funding partners, and the best technology available – we go above and beyond to help our clients receive their capital rapidly with the industry’s most competitive repayment options and interest rates. We want to break speed records, not bank accounts. Upon submitting your application, it’s reviewed by a dedicated Capital Advisor. We generate the best rates and terms at lightning speed through our funding matrix and robust lender network. Yep… it’s that simple.

Learn more about our small business financing options, including commercial loans, invoice financing, business lines of credit, and merchant cash advances here.