Financing options available to businesses and the best way to get funding

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There are several financing options available to small businesses and this can sometimes make it difficult for business owners to ascertain the best small business financing option available. Some of the options available to small business owners are highlighted as follows:

Traditional Bank Loans

Traditional Bank Loans are the conventional loans gotten from conventional banks.

Pros of Traditional Bank Loans

  • Relatively Low interest rates

  • Bigger loan amounts

  • Fixed monthly payments

  • Develop a strong relationship with the bank


Cons of Traditional Bank Loans

  • Strict credit requirements

  • Time-consuming process

  • Collateral requirement

  • Preference for established businesses 


Business line of credit

A business line of credit is a revolving line of capital that can be used to expand their operations. Business lines of credit tend to have relatively high interest rates and are targeted at companies with poor credit scores.

Pros of business line of credit

  • Revolving credit

  • Interest paid on the amount spent


Cons of business line of credit

  • Very high interest rates

  • Personal guarantee requirement

  • Significant risks in case of default


Merchant Cash Advances

Merchant cash advance lenders provide small businesses with money in exchange for a percentage of their future credit card receipts.

Pros of Merchant Cash Advances

  • Fast funding

  • No fixed monthly installments

  • Available even if with poor credit


Cons of Merchant Cash Advances

  • Relatively High fees when compared to bank loans

  • Temporary fix to business problems

  • Daily deduction from sales may reduce on-going cash flow

  • Unregulated industry


Borrowing from friends and family

Borrowing money from friends or family is another funding option explored by small business owners. The option comes with flexible repayment terms and much lower interest rates.

Pros of borrowing from friends and family

  • Fast funding

  • Flexible repayment terms

  • Low interest rates


Cons of borrowing from friends and family

  • Difficulty in raising enough money

  • Interference of family and friends in the business

  • Potential harm to the relationship in case of a default


Other funding options available to small businesses are Business Grants, Selling equity, and Invoice factoring. The pros and cons of the different available options as highlighted above will help potential borrowers determine the best way to get funding.

Media Contact
Company Name: Funding Box Company
Contact Person: Viola D. Hayes
Email: Send Email
Address:4450 Elmwood Avenue
City: Philadelphia
State: PA
Country: United States
Website: fdbox.com