One of the greatest problems of entrepreneurs is inadequate funds or lack of funds. When a business needs funding, finding the needed cash could be very challenging.
However, whether you need to support the growth of your business or cover the payroll, there are many different ways through which you can get money for your business and below are five of them:1. Traditional banks
Over the years, bank loans have proven to be a very reliable way a business can be financed.
The bank gives you the requested amount based on the value of your business and their perception of your ability to pay back the loan.
Obtaining money from bank requires your principal and interest over a particular period of time. Getting the loan could take months and you have to go through a long period of scrutiny so the bank can examine the business' credit history.Start-up businesses
aren't usually favoured when it comes to traditional banks, and getting loans from them usually comes with a certain restriction that limits a business owner when it comes to solving huge business problems.2. SBA loans
One of the cheapest sources from which you can get working capital for your business is by going through Small Business Administration (SBA).
Although the SBA itself offers numerous loan programs to business owners, it doesn't do it independently – only through an issuance from the bank.
This guarantee from the SBA through the bank makes the loan less risky to give and creates more room for favourable conditions to the borrowers.
Their interest rate is currently 6 to 8 percent and you can spread out your loan over a long period of time (currently 10 years), which means you can pay back monthly in affordable amounts.
The low interest rates and long terms mean that loans gotten from SBA are designed for businesses with investments.
As interesting as SBA loan seems, it can be very difficult to get approval. If you've been operating profitably for over two years and have a personal credit score that's over 680, then you stand a great chance at getting an SBA loan.3. Venture capital
If you're after a working capital loan
that exceeds $1 million dollars, then venture capital is for you.
However, out of the multitude that applies for the loan, only a little percentage will get funding. This is because they only get involved in specific industries such as biotech and information technology.
More so, it requires you giving up some control over your business, something a lot of business owners wouldn't opt for.4. Invoice factoring
Also known as factor loan, this is one of the easiest means through which most business owners acquire loan. Traditional banks requirements aren't valid to it.
Factoring requires that your business sells its invoices (i.e. accounts receivables) to a third party (factor) at a particular discount, till they start receiving payments from your customers. So the major key in this type of financing is to have customers who are creditworthy.
This medium helps you get more capital faster than any other avenue.5. Cash advance
If you're having trouble getting a bank loan due to your industry, then a Merchant Cash Advance (MCA) is your best bet.
With this kind of loan, you pay back by giving a certain percentage of your sales to the cash advance company till the entire loan is paid off.
Through an MCA you can have quick access to money within a week or two, unlike the traditional bank where you follow procedures upon procedures that take forever to pull through.
Bottom line: there are lots of financing options available for business owners in need of working capital. Simply consider the various options above, choose the one that best suit your current need and also allows you focus on making profits
while having full control of the business.