Business financing is one of the most challenging aspects of starting business. Expenses are to be expected and you, as the business owner must find reliable resources to help keep your business growing. Fortunately, there bank loans are not the only source of financing for a business.
Secured and Unsecured Business Loans
The traditional way to finance a business – whether it’s a big or small business, is by applying for a loan. Business loans are provided by bankers, lending companies, and credit unions. An aspiring new business owner can apply for a secured business loan or unsecured business loan, depending on their situation.
A secured business loan requires the submission of collateral such as property, vehicles or business equipment. However, if submitting collateral is not a viable option, then an unsecured loan is recommended. While unsecured loans do not require collateral, banks tend to limit the amounts they are willing to finance since they represent a higher risk.
Loans from the SBA
The Small Business Administration has several loan programs that are especially created to assist small businesses. If you have been denied by a bank or a lending company, it is worth the effort to ask help from the SBA.
It is important to understand that the SBA does not directly offer funds for small business. Instead, the SBA collaborates with lenders who are in partnership with it, and provides a guarantee on behalf of the borrower.
Nevertheless, the SBA has a standard set of criteria for each available loan program that will determine the eligibility of the loan applicant. Check out its website to get to know the criteria for eligibility and the paperwork that you need to prepare.
Business Line of Credit
A business owner can apply for a business line of credit from a bank or a lending company. Unlike a loan which is given in one lump sum payment, a line of credit gives the borrower the option to take out cash or borrow funds at any time within the preset borrowing period.
A line of credit is indispensable, especially during times when cash flow is tight or when unexpected expenses arise, because you can easily get access to cash with the new to re-apply each time.
Business leasing is another way to finance a new or an established company, by means of acquiring equipment needed to run the business operations. Instead of using a loan or a business line of credit in purchasing equipment.
Many leasing companies offer equipment lease programs for established, new and even start-up businesses. However, it’s important to make sure that you are applying for the right lease program, suited for your business type, to avoid unnecessary rejection.
What’s great about this method of business financing is that the application process of application is much easier and quicker compared to loans. It is also 100% financing.