In today’s economic scenario, funding options for small business mostly depends on two things, namely out-of-the-box thinking and creativity. In case of hiring, small businesses are considered to be the chief regulator of financial recovery. But sometimes, it becomes difficult to find business funding loans. After all, while seeking fund from a third party investor, you must have a proven business structure, projections and adequate proof that shows your product or process is worth investing upon.
No wonder that small business capital funding generally depends on family and friends’ debt capital at the initial stage as getting these people to invest into your venture is easier than finding third-party investors. At a later stage, such businesses usually start to accumulate funding from multiple sources.
Given below are five proven funding options for small business to help you get started:
1. Online Lending:
Online lending services like ‘Kabbage’ and ‘OnDeck’ are rapidly growing as alternative business funding options to conventional business loans. Fast processing is one of the chief advantages of online lenders. For an entrepreneur, it takes a maximum of one hour to submit a loan application and after completing further proceedings, the lender issues the fund within a day. On the other hand, it takes weeks or sometimes even months to complete the procedure in case of conventional loans.
Factoring is one of the major alternative business funding services as compared to professional loan processes. Factoring service attracts small businesses as they need cash but the credit sources are limited. It is an amazing process to convert work product or inventory into cash required for paying payrolls, vendors etc. Factors are those who purchase receivables and their main job is to buy invoices depending upon the customer’s credit. After collection of the receivables, the customer is informed to directly pay the factor. In addition to giving advance against the assets, factors also plays a major role in processing the receivables, thus helping the business owner to outsource the accounts receivable function of the company.
3. Look for SBA Loans:
Small Business Administration (SBA) loans are usually the most preferred choice for small businesses in the U.S. when it comes to taking business funding loans. SBA supports growing and emerging small businesses in terms of services, resources and tools at reasonable rates. Though getting a loan from SBA is fairly straightforward and accessible, the waiting period is much longer. Also, SBA doesn’t provide financial assistance for some businesses like lending or investment fund, loan packaging, or those involved in illegal activities etc.
4. Look for Lending Sources:
Other than conventional loan options there are some alternative business funding sources like ‘OnDeck’, ‘Kabbage’ and ‘PayPal’. Following are brief criteria for obtaining a loan from the above mentioned options:
• OnDeck: It provides loans based on the yearly revenue of the business.
• Kabbage: It awards loans after screening the real-life statistics of the business.
• PayPal: The loan depends on the earnings of the business on PayPal website.
5. Community Banks:
If your business has a steady profitability and growth record, you should go for bank loans because they will give you the best interest rate. Community banks are beneficial for small business owners in terms of loan approval compared to the big banks. Another advantage of such bank loans is that you don’t need to surrender your company equity to obtain the loan.
Today, small business owners have more flexibility than ever to choose an alternative business funding option from the plethora of resources available. But before opting for any of these, you need to make a self assessment of the actual financial assistance you really need. Though bootstrapping is a good option for startups, at a certain stage, you’ll have to look for third party investors for the sake of growth. So, while choosing a small business capital funding solution, it’s really important to keep the revenue and operational maintenance aspects in mind.