5 Small Business Funding Options

September 29, 2016

Steady and sufficient cash flow can mean the success or failure of your business. Choosing the right small business funding option provides your company with the cash flow it needs to operate and grow.  It’s important to know and understand the small business funding options available.

5 Small Business Funding Options

1. Small Business Loans

Small business loans are an option many business owners use to fund their companies. The process to obtain a small business loan can be lengthy and extensive.

The bank limits the amount of capital you’re able to have access to, so when you need more in the future to support your growing business, it can be a challenge to obtain. With small business loans a principal payment, plus an interest payment, are paid monthly.

Often, small business loans are only given to well-established companies with good credit. Banks like to see financial history, profit, and loss statements and business growth. Start-ups won’t have enough of this information yet since they’re in the beginning stages. Those with less-than-perfect credit may have challenges obtaining a business loan as well. Those that do get approved don’t always get the amount of cash they requested.

2. Credit Cards

Some business owners choose to use credit cards to help finance their businesses. Some use a personal credit card whereas others use a business credit card.

When using credit cards to fund your business, it provides your company with the cash flow needed to survive. You can also earn rewards such as cash or airline miles. If payments are made on time, credit cards increase your credit score, making it easier to secure a loan in the future.

However, many credit cards, both personal and business cards, have higher interest rates compared to small business loans. If you get behind on payments, not only will you pay a lot of interest, but your credit score will also drop.

3. Invoice Factoring

Invoice factoring is a cash-flow solution business in a variety of stages turns to. From start-ups to well-established companies, invoice factoring provides a steady stream of cash to operate and grow your business.

Invoice factoring companies purchase your receivables and advance you same-day. You can use that money to meet payroll, get caught up on bills, invest in more equipment or any other business needs you have.

Invoice factoring does not create debt on your balance sheet. The application and funding process is easy and quick. Whether you have good credit, bad credit or no credit, invoice factoring is a finance solution that provides your business with the cash it needs.

Scale Funding is known for its low rates and high advances – making invoice factoring a cost-effective solution for entrepreneurs.

4. Investors

Often, when business owners decide to turn to investors to help fund their business, they go to their friends and family. Although they might be willing to invest, it’s a good idea to think this through before mixing money with family or friends.

Angel investors are professionals who are willing to invest money into a business. They provide funds a business needs to maintain and grow, but they’ll want something in return such as profit sharing, a percentage of the company or interest on the money borrowed.

5. Microlending or Microloans

Microlending, also referred to as microloans, is a form of financing where small loans are borrowed to those in need from individuals rather from banks. Often, entrepreneurs turn to microlending or microloans when they’re unable to obtain financing through a bank.

Although microlending provides financing for your business, the costs and time frames of the loans can be difficult to manage. According to bankrate.com, the interest rates range from nine percent to 14 percent with a duration of six months to six years. Often, the duration of the microloans is closer to the short end of the range.

What Small Business Funding Option is Right for You?

There are several small business funding options available. Choosing the right one for your company is important. Make sure you know the terms of the finance solution you choose including the rate, duration and other fees.

If you have questions about invoice factoring or want to get started, contact a financial expert at Scale Funding today. Our invoice factoring solution provides you with the cash you need in 24 hours. Receive a free no-obligation quote in as little as 15 minutes. Call (800) 707-4845