Quick Overview of Small Business Financing

Businesses cost money.

And sometimes, your current cash flow won’t cut it. Fortunately, today’s economic environment has seemingly more ways than ever to get the financing you need, for whatever the purpose.

A business line of credit functions like a credit card; however, the credit limit is often higher and the interest rate is generally lower. Often called revolving credit, it is usually an excellent option to supplement cash flow and have on hand for emergencies.

Having a business credit card on hand for small, routine purchases or emergencies is a popular solution. Avoid interest charges by paying the balance in full every month.

A Merchant cash advance (MCA) issues a single cash payment to be repaid by future credit card transactions. This is often a great way to get cash if your company has a high volume of regular credit card sales.

Purchase order financing can be a great way to accept an unusually large order and keep a customer happy with uninterrupted service. A PO lender can issue a loan to pay for the material you need to fill the order, provided your customer is well-established with a good credit history.

When your company needs to purchase new equipment or machinery, lenders offer equipment financing so you can buy what you need and pay for it over time. Equipment loans are self-securing, so assets for collateral are not usually required.

An invoice factoring company can give you access to fast cash by purchasing your outstanding accounts receivable at a percentage of the total value. The factoring company will collect the payments, take a fee and remit any remaining amount to you.

Accounts receivable financing will lend you a percentage of your outstanding AR, so you can have access to cash without waiting for your customers to pay. Unlike factoring, you collect from your customer directly and keep any balance minus the interest and fees.

Instead of business financing in the form of a loan, crowdfunding seeks donations from the public to launch your product, typically a fresh idea or invention. Some progressive individuals find the notoriety of getting on board before anyone else very chic.

If you haven’t had success with obtaining financing, you might consider peer-to-peer lending. Online sites can connect you with individuals who are willing to issue you a short-term loan, and the marketplace handles most of the logistics for a charge.

Traditional bank loans come in a variety of amounts, terms and used for virtually any purpose. Bank loans backed by the Small Business Administration (SBA) are often less risky for the financial institution, making the lender more likely to work with a small business.

No matter your situation, a little research and perseverance can often yield great results for your small business financing needs.


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