How to get business funding is one of the most important questions a small business owner or entrepreneur asks when starting out.
If you’re a small business owner or a seasoned entrepreneur you’ll agree that getting money is the fastest way of getting more money.
In some tier one countries like the United states, small business owners can easily attend grant programs to seek grant funds for research & development.
Grant programs like the fedex small business grant, minority business development agency & government grant for small businesses are in the lookout for businesses with good growth potential.
There are many reasons why you may be interested in getting small business growth funds.
- For working capital
- For cash flow
- For Equipment purchase
- For emergencies and much more
In this article, we went through the best ways to get small business growth funds quick and easy.
Let’s start by understanding the type of lender and funds available to you.
The age of your business, revenue generated from the business and how fast you need funds will influence the lender & type of funding that would be best for your business
When it comes to small business growth funds they’re three main types of lenders.
Small Business Growth Funds Lenders
- SBA Funding {Small Business Administration}
The small business administration offers different types of small business growth funds and loans.
The biggest benefit is that SBA partners with lenders to provide the funds and guarantees 75% to 90% of the loans for the lender.
This results in better terms and easy qualification for small businesses.
Now, the downside of business funding and loans from SBA comes in the form of increased paperwork & approval speeds that can be slower than other lenders.
SBA funding is best for any business that is ready to weather the time it takes to get funds approved
2. Conventional Banks Funding
These are the regular everyday banks that provide funding and loans to businesses.
Conventional banks funding & loans generally have the best terms regarding interest rates & fees when it comes to small business growth funds.
The biggest downside of business funding & loans from a conventional bank is how difficult it is to qualify and get approved especially for new businesses.
So, funding & loans from conventional banks is best suited for established businesses with consistent revenue.
3. Alternative Lenders
Alternative lenders are online lenders of capital for businesses.
Some of the benefits of getting business funding & loans from online alternative lenders are
- Funds approval typically takes less than a few hours & funds are provided in less than a week
- Alternative lenders also have the easiest eligibility requirements and less rules for the use of funds.
The downside of online alternative lenders is that they typically offer the highest rates & fees compared to other types of lenders.
But, because they’re so easy to get business growth funds, alternative lenders are best for startups or business owners without high revenue.
We’ve talked about the lenders now let’s talk about the type of funds & loans
Types of Loans and Business Growth Funds For Small Business
- Bank Loans
Bank loans can be a great way to get small business funded, these are provided by conventional banks.
The benefit of bank loans is that they do have the best interest rate out of all options, but the downside is the strict qualification needed to qualify.
Bank loans are perfect for businesses with great credit.
2. SBA Loans
7[A] Loans
These are loan programs backed by the SBA for up to five million with terms up to 25 years.
The biggest benefit is that they’re over six different loan programs to meet your needs, but the downside is that you’ll need at least a 690 credit score, 2 years in business & consistent revenue.
[Micro Loans}
Micro loans are very accessible for businesses without large revenue or good credit.
The downside is that the process can take a few weeks, business plan, collateral against the loan as well as personal guarantee.
This is best for startups or businesses that have a bad or no credit history.
{504 Loan}
The 504 loans are loans up to $5.5 million for the purchase of commercial real estate, land and equipment with terms up to 25 years.
The biggest benefit of this loan is its relatively low interest rates and small down payment of only 10% payment.
But, the downside is the lengthy process with involvement from a bank and an SBA approved certified development company.
This is best for established businesses who need to purchase equipment or buy real- estate.
3. Term loan
Term loan is a lump sum paid back in fixed increments over time, the biggest benefit is that it is fast, online approval and fund disbursement with a consistent payment structure.
The downside is that interest rate & fees are typically higher than bank loans or benefit loans.
This type of loan is best for startup or business owners with not so great credit, popular lenders that provide term loans are kabbage, funding circle, bluevine, on-deck & fundbox.
4. Line of Credit
Line of credit is a fixed and flexible revolving access to cash up to your limit.
The benefit is that interest is paid only on the amount drawn & once you pay it back the funds are immediately available for use again.
The downside is that fees can be costly and borrowing amounts can be lower than with a loan from a conventional bank
Line of credit is best for all businesses who can qualify and popular lenders are kabbage, bluevine, fundation.
5. Invoice Financing
Invoice financing is the cash advance {typically 50- 90%] on unpaid invoices.
The biggest benefit of invoice financing is that it’s easier to qualify for than loans from conventional banks due to the invoices being collated.
The downside is that fees can be greater than other options and funds are dependent on your sales continuing.
Invoice financing is best for businesses with consistent sales and popular lenders include bluevine and fundbox.
6. Merchant Cash Advance
Merchant cash advance is a cash advance on unpaid credit card sales.
The benefit is that businesses with bad credit or minimal business history can still qualify, the downside is that this is the most expensive form of financing available.
Merchant cash advance is best for businesses who have exhausted other loan options, and popular lenders are Rapid Finance, Can capital & Paypal.
7. Equipment Financing
Equipment financing are loans specifically for purchasing equipment.
The benefits are low interest rates, fixed monthly payments and leases may be available for the equipment.
The downside is that funds are limited to only equipment purchase.
Equipment financing is best for businesses that needs equipment but don’t want to purchase up-front.
And popular lenders include Crest capital, Balboa Capital & Currency Finance.
In conclusion, securing a small business growth fund is a critical step for entrepreneurs aspiring to take their ventures to new heights.
By following the strategic steps outlined in this guide, including thorough research, meticulous financial planning, and leveraging various funding sources, businesses can position themselves for success.
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