The Different Methods of Financing a Business
There are different ways to finance a business, depending on the financial situation of the borrower and the purpose for borrowing funds. In this article, let’s discuss the most popular business financing resources that you can consider:
Short Term Loans. As the name suggests, short term loans are expected to be paid within a short repayment period. The application process is usually quick and easy. However, the amount of loan is also limited to a smaller value. Short term loans are great to cover for upfront expenses or small projects.
Long Term Loans. Many lending companies that offer long term loans for businesses require the submission of security or collateral in exchange for the loan. The borrower’s home, vehicle, or business asset can be used as security for the loan. Repayment is stretched throughout a long term period which makes it possible for the borrower to apply for a large amount of loan.
Business Equipment Lease. Many businesses lease business equipment as a way to save money. In fact, this is a great business financing method if you are a new business because it gives you the chance to start up the operations even with a limited budget.
Nevertheless, equipment leasing isn’t just for new businesses. Even established businesses use this form of financing acquire additional devices or to get access to the latest models of equipment without spending a fortune.
Business line of credit. A business line of credit can be acquired from a bank or a lending company. However, unlike a loan which is given as one lump sum payment, a line of credit gives the borrower the option to take cash advances at anytime during a preset period. As long as the maximum amount is not reached, the borrower may continue to take out cash until the agreed repayment period begins.
Business Credit Cards. A small business credit card provides its holder with a credit line. Typically, the range of credit limit is determined based upon the account holder’s credit rating. If you have a bad credit history, you may start out with a low limit or apply for a secured business credit card. A secured credit card for business involves the submission of cash deposit which can range anywhere from $500 to $1,000 or higher.
Accounts Receivables Factoring. Factoring is another business financing method that is popular especially among established businesses. In order to qualify, a business must be active in the market for at least 2 years or longer.
Businesses which have a following of good paying customers can truly benefit from accounts receivables factoring. Through this arrangement, invoices are sold to the factoring company in order to acquire cash advance. Many lenders offer up to 80% cash advance from the total amount of invoices submitted.
Irish Taylor is a bussiness loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.
Copyright 2010.
Related Article: Borrowing Money To Build Your Business
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