In today’s market, your bank is not the only option when it comes to funding options for your business. Alternative financing; loans secured and uncollateralized, lines of credit, leasing and equipment financing, revenue based loans, and advances are all options that may be available to your business. The keys to getting the capital your business needs to grow and achieve your goals is better understanding the products that may be available and how best to apply these.
Identifying the Best Financing Options
Knowing there is a need for capital is the first step in the journey. The next, and crucial step is to determine more specifically what the needs of your business are and the use of funds. This is important because there is a limit to how much capital can be borrowed.
The financing product selected should be in line with the use of the funds based on the following factors; term of repayment, return on investment, ability to meet repayment terms, and your business’s ability to qualify.
Matching the term of the product to the use of funds is a must to ensure the correct financial product is utilized, and to optimize your business borrowing potential.
Other aspects to consider:
Return on Investment: Is the expense or investment you are making (including the cost of the borrowed capital) going to return sufficient growth and profitability that borrowing makes sense?
Repayment: How does the repayment impact cash flow of the business currently and over the term of the repayment?
Range of Products: What products, terms, and cost of funds might the business qualify for? How broad or narrow are my borrowing options?
Most Common and Useful Finance Products for Small Businesses
The type of financing product to use depends on what your small business needs to grow, but what are the types of financing products that are most effective for small businesses?
Merchant Cash Advance
One of the most popular types of funding, a Merchant Cash Advance (MCA), is a quick way to get funding. A Merchant Cash Advance is typically used for short term and recurring purposes such as a seasonal inventory needs, marketing campaigns, taking advantage of new opportunities, or addressing unanticipated expenses that would severely impact operating capital.
Equipment Leasing & Financing
Leasing equipment can provide a great deal of flexibility for a business. Leasing equipment enables business owners to avoid large upfront costs. This is especially helpful on acquiring expensive pieces of equipment, scheduled equipment and machinery replacement, or adding capacity.
Revenue Based Loans
Revenue based loans can be an excellent option as specific collateral is not required, instead loans are based on past operating performance looking primarily at business revenue and cash flow. These loans are designed to meet short term and recurring needs of the business.
Asset Based Facilities
For B2B companies, taking advantage of asset based facility can be the most efficient way to increase working capital. This type of financing uses accounts receivable and other assets such as inventory or equipment as leverage to establish a revolving lines and longer term loans.
Secured Term Loans
Businesses and business owners with assets to secure the loan can expect longer terms and lower interest rates, typically these loans are well suited for larger purchases that will have longer anticipated return for the business such as the acquisition of another business, or partner buyout.
Looking for capital for your business? Want help identifying the best fit for your needs and circumstances? Capital Partners Network can help! CPN works with a broad array of lenders offering short, mid and long term business borrowing options. We can provide expert advice on what financing will best help meet your goals and that your business can qualify for. Call us today at (866) 277-7624 or email at firstname.lastname@example.org