8 Small Business Financing Options You Should Consider | Behalf

By January 6, 2017Business Financing
small business financing options you should consider

8 Small Business Financing Options You Should Consider

On the hunt for small business financing? As a business owner, you understand that choosing financing is one of the most important business decisions you will make. There are a lot of small business financing options out there, but not all of them can meet your business needs in a cost effective way. Consider the reason you want to finance your business. There are a multitude of short term and long term business financing options available, offered by the banks; online lenders; and other financial institutions, and each serves a unique purpose. This article describes an array of small business financing options that may or may not be a fit for your business. Do yourself and your business a favor by making educated decisions.

1) Bank Loan

A bank loan is one of the most popular small business financing options. Though lending standards are increasingly restrictive, bank loans are a reliable source of funding. Many banks offer loans to growing businesses at affordable prices, but these loans are highly regulated and harder to secure. The extensive bank loan approval process makes it a struggle for small businesses to get accepted, so it’s not one of the guaranteed business financing options. However, strong candidates should apply, as they are affordable and have protective regulations to not only protect the bank but also your business.

2) SBA Loan

Many banks are reluctant to fund small businesses, forcing small business owners to turn to other business financing options like loans from the U.S. Small Business Administration. Loans backed by the SBA are also regulated, making them a safe alternative to bank loans. Unfortunately, securing an SBA loan can also be complicated. Funding for these loans can run out, because they are in such high demand. Your business must meet the SBA’s qualifications to receive the loan and find a reputable SBA provider because the SBA does not lend directly.

3) Factoring

With this small business financing option, businesses can sell their receivables to a factor that will immediately advance them funds. In essence, it’s a way to buy time in waiting for your outstanding receivables. Your business is no less dependent on customer payment with factoring – it simply minimizes some of your risk by accelerating some cash flow and the factor is paid for taking on that risk. Factoring is a relatively fast way to acquire cash, typically a 1-2 week paperwork process to start, but it is also costly. Once you take into account upfront fees and recourse, you could be trading off 20% of your receivables for the convenience of quick funds. Depending on your business needs this may only bring temporary relief.

4) Credit Card

Credit cards are familiar territory, which is why many small business owners gravitate to them as one of their preferred small business financing options. Credit cards are a great way to cushion for small expenses, like office supplies and business travel. They are also incredibly convenient, when accepted. However, most credit card limits are not large enough to fund your most critical business buying – think inventory, manufacturing, database services – so their use is limited in a pinch. They can also carry some risk to your personal credit as the small business owner, who typically guarantees the credit card debt. Your personal funds and credit score can take a major hit if you fall behind on payments or habitually max out spending.

5) Crowdfunding

If you are looking for unconventional, low cost small business financing options, look no further. Crowdfunding sites allow you to fundraise, by setting a goal on how much money you would like to raise over a set period of time. You can invite family, friends or whoever you’d like to pledge money and pool their investments. Note that this small business financing option is not for long term business financing; it works best if you have a particular short term need to fill like a project.

6) Angel Investor

If you are an early stage business or start-up, you should consider getting an angel investor to finance your business. Small business financing options like this take more creative effort to secure, but angel investors usually bring more than money to the table. They can offer tactical support and provide insight to help your business succeed in exchange for 20 to 25 percent return on their investment. It’s a hefty financial commitment, but with the right investor the benefit likely outweighs the price. The challenge is attracting a great angel investor. Then once you pitch your business as a good investment and get an angel investor to commit, you must cultivate your relationship with them to hold their interest and stand out among their other investments.

7) Venture Capitalist

This is another start-up friendly business financing option for early stage businesses with high-growth potential. Raising funds through a venture capitalist takes business financing to new heights, giving companies access to millions. That being said, venture capitalists have a voice in company decisions and tend to recover their investment within three to five years – one way or another. Many small business owners feel giving up this much control is a cost that is too high for them to bear.

8) Online Lending

Online lending has given rise to a fast growing and diverse universe of small business funding options. Where banks have been rigid with application processes, approval criteria, and fixed product constructs; new lending entrants have innovated myriad flexible products to serve the unmet needs of small businesses. Online lenders are not under the same strict regulations banks have to endure, so they can be more innovative in approvals, pricing constructs, etc. These lenders are able to serve niche needs, whatever yours may be, and may ultimately be your ideal business fit. Yet the lack of regulation also puts the burden on you to do your research in selecting your lenders and products. Use caution when shopping around for an online lender and lookout for predatory practices like flashy language, confusing pricing, and urgency tactics.

There are even more small business financing options out there, so shopping around for the right ones can be overwhelming. Breathe. You drastically narrow your search when you understand your particular business needs. It is also helpful to remind yourself that there is no one-size-fits-all solution for business funding and you will likely need to try several to find your perfect funding mix.

Is Behalf the Right Business Financing Option For Your Small Business?

Regardless of your primary selection, your business would likely benefit from a Behalf purchasing line of credit. For all your business buying where your business credit card does not fit the bill, you can increase your purchasing power with a Behalf line of credit up to $50,000. There are no costs to open a line and you can get up to six months of extra time on all business purchases you fund with Behalf. A Behalf line of credit is the perfect complement to your payments arsenal to finance inventory, production, and other large business purchases.

Apply online today.