As a small business owner, you have more options today, than you ever had in the past when it comes to borrowing working capital.
Even though having more options is great, it is often overwhelming to discover which option is right for your particular business. Here you can learn about the options you have for working capital. When you are informed, it will help ensure that you make the right decision related to growing your business.
1. An SBA Loan
This type of loan is ideal for long-term working capital investments. It is also a long that is suited for a business owner who has been in operation for a minimum of two years and who has a great credit rating. When you are able to acquire a loan from the Small Business Administration, you will find that the rates are extremely affordable. While the SBA is not the actual lending agency, it will guarantee the loans that have been issues by a bank. This type of guarantee is going to reduce the risk of the lender, which means that you are going to have access to terms that are much more favorable than if you did not go through this organization.
2. Shorter Term Loans Offered Online
If you have a short-term financial need, such as the need to purchase supplies and inventory, then this is a great option. This loan is best for any business that has been operating for at least 12 months. The business also needs to have annual revenue that is greater than $50,000 and a credit rating that is at least 500.
If you don’t meet the qualifications for an SBA backed loan, then this may be a viable option. These loans are easier to qualify for and don’t have as stringent requirements. Even though these are both convenient and fast, they do come at a higher price. The annual interest rates can vary between 20 up to 80 percent. These loans are typically repaid in a period of three months up to three years.
3. Invoice Factoring
This type loan is designed to cover any type of business expense that comes up when you are waiting for payments from your clients or customers. This type of funding is best for any B2B business that has issues with cash flow gaps because of slower invoice payments. If a business fails, then it is typically because of cash flow issues. With invoice factoring, these problems are able to be addressed and a business owner can avoid having to wait 30 to 90 days to receive the payment they are owed. The rates begin at just 2.5 percent for invoices of 30 days.
Obtaining money through crowdfunding efforts are ideal for expanding your startup business. Any entrepreneur that is still in the early stages of growing their brand-new business should consider this option. The options that were mentioned above are best for businesses that are already established. However, when it comes to a startup they are often at a disadvantage. This is because there is no track record that can be looked into. There are a number of crowdfunding options to choose from so make sure that you look into all of them prior to choosing one.
5. A Peer 2 Peer Loan
If you have short-term needs for working capital then this is a smart option. This type of loan is best for a business that has good credit and just needs a small amount of money. These types of loans are very similar to crowdfunding because many investors are contributing small amounts of cash to help grow your business.
If you are considering working capital options, then you should think about the options that are here. When you do this, you will get the funds that you need and don’t have to worry about running short on money.