There are several financing options available to small businesses and this can sometimes make it difficult for business owners to ascertain the best small business financing option available. Some of the options available to small business owners are highlighted as follows:
Traditional Bank Loans
Traditional Bank Loans are the conventional loans gotten from conventional banks.
Pros of Traditional Bank Loans
Relatively Low interest rates
Bigger loan amounts
Fixed monthly payments
Develop a strong relationship with the bank
Cons of Traditional Bank Loans
Strict credit requirements
Time-consuming process
Collateral requirement
Preference for established businesses
Business line of credit
A business line of credit is a revolving line of capital that can be used to expand their operations. Business lines of credit tend to have relatively high interest rates and are targeted at companies with poor credit scores.
Pros of business line of credit
Revolving credit
Interest paid on the amount spent
Cons of business line of credit
Very high interest rates
Personal guarantee requirement
Significant risks in case of default
Merchant Cash Advances
Merchant cash advance lenders provide small businesses with money in exchange for a percentage of their future credit card receipts.
Pros of Merchant Cash Advances
Fast funding
No fixed monthly installments
Available even if with poor credit
Cons of Merchant Cash Advances
Relatively High fees when compared to bank loans
Temporary fix to business problems
Daily deduction from sales may reduce on-going cash flow
Unregulated industry
Borrowing from friends and family
Borrowing money from friends or family is another funding option explored by small business owners. The option comes with flexible repayment terms and much lower interest rates.
Pros of borrowing from friends and family
Flexible repayment terms
Low interest rates
Cons of borrowing from friends and family
Difficulty in raising enough money
Interference of family and friends in the business
Potential harm to the relationship in case of a default
Other funding options available to small businesses are Business Grants, Selling equity, and Invoice factoring. The pros and cons of the different available options as highlighted above will help potential borrowers determine the best way to get funding.
Media ContactCompany Name: Funding Box CompanyContact Person: Viola D. HayesEmail: Send EmailAddress:4450 Elmwood Avenue City: PhiladelphiaState: PA Country: United StatesWebsite: fdbox.com