Small businesses contribute majorly to the economy of any nation and the United States of America is not an exception. However, small businesses are often faced with the challenge of accessing finance to fund their business. Thankfully, there are a number of ways of how to get your business funded, some of which are briefly highlighted as follows.
Traditional Bank Loans
Traditional bank loans have been available for years. Unfortunately, it has become increasingly difficult for small businesses to get such loans with banks tightening their lending criteria significantly in the wake of the 2008 financial crisis.
Besides the tons of paperwork that businesses have to jump through, they also have to wait for weeks or even months to get funded, and might also need to put up collateral to obtain financing.
Business Lines of Credit
A business line of credit is a revolving line of capital that can be used to grow a business when needed. Business lines of credit tend to have high interest rates; companies with poor credit scores can still qualify for this type of small business financing, but they will likely have to pay even higher interest rates.
Merchant Cash Advances
Merchant cash advance lenders give small businesses money in exchange for a percentage of their future credit card receipts. This type of funding offers fast funding and can be gotten even with poor credit. However, merchant cash advances are usually a temporary fix to business problems as they often come with relatively high fees and ongoing cash flow reductions due to daily deduction from sales.
Loans from the Small Business Administration
The Small Business Administration (SBA) guarantees some loans, issued by banks and other lenders, to small businesses. Because of these guarantees, lenders are typically more willing to take on riskier loans and may fund entrepreneurs with little business experience and suboptimal or nonexistent credit.
Other funding options available to businesses include crowdfunding, borrowing from friends and family, as well as business grants.