Imagine you’re a home-based cake decorator who’s just been asked to make 5000 chocolate covered strawberries for the local chamber of commerce. This could be huge for your business. But, do you have the capital available to purchase supplies and hire extra help?
How about this: your cleaning company just secured a contract with the local government to maintain of City Hall. Do you have enough equipment and supplies to cover the job?
If your answer is no, it’s time to explore how having extra funds readily available can help your business grow.
If you are looking to expand your business or need additional cashflow, having business funding available can make that happen more quickly and easily. Once you’ve got a DUNS number and your EIN, you are ready to begin the process of building your business credit.
Here are a few different business financing products that can help your business handle its growth.
Small Business Administration Loans
The Small Business Administration (SBA) collaborates with lenders by guaranteeing a large percentage of a loan granted to a small business. As a result, there is less risk present to lenders. Loans backed by the SBA typically have lower interest rates–between 7 and 13 percent. Payment terms are between five and twenty-five years, making it one of the most flexible of all the funding options. However, the application process for an SBA loan is lengthy. Unfortunately, so is the processing time–at least two weeks to a month.
Business Line of Credit
If you need a quick approval and ongoing access to funds, an unsecured business line of credit might be perfect.
A business line of credit (also known as a revolving line of credit) gives a business owner access to a specific amount of funds. They can withdraw from the account as needed and will only pay interest on the money that is used. Once the lender is repaid, the available limit is restored.
Unsecured business lines don’t need collateral, so you won’t have to include any of your personal assets. Interest rates on business lines of credit vary between 7 and 25 percent.
Business Credit Card
Like unsecured business lines of credit, business credit cards are a great tool for entrepreneurs in need of funding. Many business credit cards allow cardholders to earn cashback or special rewards such as frequent flyer miles. With a business credit card, you can also track spending and manage funds. As an added benefit, reporting expenses during tax time becomes much easier.
Business credit cards are often the first type of business credit an entrepreneur will gain access to. Without a business credit history, many lenders are willing to issue these cards based on a positive personal credit rating.
Check This Out: How to Build Business Credit Fast
Short on cash, but in need of equipment to deliver your services or create products? Equipment financing might be the perfect solution. Unlike lines of credit or a business credit card, equipment financing is an asset-based loan. An asset-based loan considers the overall value of the asset and then uses that as collateral. For instance, if you finance a large printer for your business, the printer can be used collateral. If you default on the loan, the lender can take the printer back.
While you’ll be paying interest on the equipment you’ve furnished, it shouldn’t present a serious hardship for a profitable business.
Having access to business funding is a great tool for any company that needs extra capital to meet its demands. However, it’s best to keep a long term mindset. Always remember to borrow conservatively and keep your payment schedule current.