Financing is one of the most pressing needs of many businesses, especially when getting started. A loan could make the difference between you being able to fulfill that big order or keeping the lights on in certain cases. Yet, many business owners have a murky understanding of financing and business credit and are therefore either unaware of the options open to them or wrongfully assume that they’re ineligible. However, there are tons of different areas owners can explore, no matter how long they’ve been in business or the perceived state of their finances. Here are a few of them.
Invoice Factoring
Invoice factoring is a good option if you’ve been in business for a while and have a good number of accounts receivable. This is also a good choice if your credit situation is shaky, as your debtors’ creditworthiness will be the main determining factor.
With invoice factoring, you can borrow against invoices that haven’t been paid yet in exchange for a fee. This is why your clients’ credit will be more important. If they have good credit, you should be able to get invoice factoring as long as you meet the minimal requirements. These loans are often used by businesses that need working capital or money for things such as inventory or equipment, for instance.
No Money Down Loans
No money down loans are often seen as the holy grail of business loans and can seem unattainable to people with a budding business. However, you should know that while your credit score will be considered, it is not the sole determining factor. You could also find alternative lenders with much more flexible terms.
Some lenders, for instance, will prefer to look at recent financial activity to gauge worthiness. Even if you were on a rocky start, they can assess by recent transaction volume and expenses your ability to repay. So, don’t expect that you need to have stellar credit or deal with a major institution to get a no money down loan. Take advantage of the options that are open to you and go with lenders who are friendly to businesses your size.
Give Away Equity
Another option if you want to finance your business is to offer equity in it. This could be to angel investors, a venture capital or private equity firm, or someone you know.
The ability to find investors will depend on financial activity, but also the field you’re in. For instance, you’ll have a much easier time finding venture capital firms to work with you if you’re in the tech field. In all cases, those who are able to demonstrate value, potential growth, competence, and have a sound valuation will have a better chance. Those who are willing to accept their limitations and offer control will also have more chances of striking a deal.
Financing your business is possible if you have realistic expectations and are aware of your options. Make sure that you consider all of those that are at your disposal, and don’t automatically disqualify yourself based on assumptions.
