Few business owners enjoy the luxury of having enough cash on hand to handle expansions, finance ad campaigns, or make improvements to their operations. In most circumstances, it’s necessary to obtain some type of outside help in order to secure the funds and move forward with the project at hand. What some business owners don’t know is there are more ways to obtain those funds than they realize. Here are four potential financing approaches that you should learn more about today.
The first approach to financing that is likely to come to mind is the business loan. For many owners, pursuing loans from traditional lenders is the only approach they’ve ever used. That’s a fine solution when the company is doing well and the credit score is high. What about the business owner who has been through a rough period and has a less than perfect score?
There are lenders who are willing to extend bad credit business loans based less on where the company was a couple of years ago and more on where it is today. You may have heard about the higher interest rates and other conditions that apply. Don’t be put off by what you hear. The terms overall are often more favorable than people think.
You may find that an angel investor or a group of investors would be willing to provide the financing needed. That financing amounts to a private loan that you will repay according to the terms found in the loan agreement. While the conditions may vary, it’s not unusual for the business owner to agree to pay interest on the amount borrowed and also offer some other type of incentive to the investor. When the terms will allow you to still control the day to day activities of the business as you repay the debt, the deal is even sweeter.
Do most of your customers remit payments using credit cards? If so, you may find that a merchant advance is in order. Many card processing companies are willing to advance money to their steady clients based on the average face value of the transactions conducted per month. With a Thinking Capital merchant advance, you repay the advance by agreeing to allow the provider to retain a certain percentage of every credit card transaction conducted until the loan is settled in full. The remainder of the money from each transaction still flows directly into your operating account.
Sometimes known as factoring, this arrangement allows you to sell a batch of client invoices to a lender who in turn advances most of the batch value to you in one or two business days. Your customers send payments to a lockbox set up by the lender and they are credited to your account. Eventually, the remainder of the batch value is released to you, less a small amount that is retained as payment for services rendered.
Don’t think you have only one or two options for business financing. Talk with an expert and explore these and other possibilities. Getting the money you need may be easier than you think.