When a small business needs financing, who does it turn to? There are many ways for a small business to obtain financing, each with its own unique advantages. While one may be good for a particular business, another may be more suitable for the next business. It all depends on the preferences of the small business and whether or not it will be approved. For small business owners looking to move up in the world, check out this list of sources to get capital fast.
- Banks
This is probably the first thing someone thinks of when it comes to loans. After all, lending money to customers and charging interest is one of the ways banks make their profits. It’s usually pretty easy to get approved with a good credit score. However, as just said, banks make money on interest. Therefore, interest rates on traditional bank loans tend to be a bit higher than those from other sources, although it varies with the market rate and the applicant’s credit rating.
- Merchant Cash Advance
Although similar to a bank loan, a merchant cash advance is usually safer and earns less interest. First of all, getting approved by a company like Water Street Capital is a much easier process than through a bank. As long as the business earns an average of $10,000 a month, you can confidently start applying for up to $500,000! The application can be submitted online and it usually takes around 3 business days to receive the money, however the company can use the money for a variety of different needs such as advertising, payroll, expansions, upgrades and more. .
The way the customer repays the loan is also fundamentally different, making this one of the best options for small businesses. The business agrees with the lender to repay the loan with a small percentage of its sales each month (as taxes). The amount is automatically withdrawn every month and varies depending on the success of the business. If you have a slow month, you pay less, and if you enjoy more profit, you’ll pay off debt faster!
- fundraising
While it can’t really be labeled a “trustworthy” source, crowdfunding has exploded in popularity in recent years with sites like Indiegogo and GoFundMe. It can be a great way to gain investors for a small business looking to expand. If the product is popular or unique enough, it will surely get sponsors. However, it cannot always be counted on to arrive. If the company does not receive enough investment to meet its minimum goal, it receives nothing. It’s not the go-to source for large financial requests, but it has proven effective in the past, sometimes with businesses even making millions of dollars!