There comes a time in the life cycle of a business when it needs some form of financial help. If you’re an SME owner, for instance, you could want more funds to buy equipment, hire new staff, grow your brand’s awareness, clear your debts, or just meet daily operational costs.
Whichever reason it may be, raising capital is rarely an easy endeavor. Nevertheless, you can sleep a little more soundly at night by choosing the method that is best for your situation. Below are some viable options.
- SBA loans
The Small Business Association has been issuing loans to SMEs for years, and they’ve become the first stop many young merchants make when looking for funding. SBA loans typically come with favorable interest rates and expiration times. However, they are also riddled with strict requirements, such as high credit scores, a solid business plan, collateral, and no outstanding debts.
Consequently, only a handful of applicants end up getting funded by the SBA. Operations like life insurance providers, casinos, and private clubs are usually exempt from funding, and cannot receive assistance.
- Microloan programs
If your capital demands are not more than $50,000, you can apply for a microloan. Microloans are not only a good option for those starting a small business, but could also provide assistance to businesses that are already in operation and need an influx of capital to meet operational costs. The rates and application requirements will vary with your provider, as well as the nature of your business.
- Personal loans
Many entrepreneurs start out by investing their own money into the firm. If you have good credit and faith in your operation, you could qualify for a personal loan to help you finance it. Such a loan may only get you a fraction of the money you need, but it will give your business the stepping stone it needs.
The probability of acquiring a personal loan and the interest rates are contingent on your credit score.
- Alternative loans
Personal loans, microloans, and the SBA are good funding choices for small businesses. However, not everyone can meet the stringent requirements that come with the applications. If your credit score is below 600, for example, your best bet at scoring capital would be with a high-risk business loan. With the right provider, you can get capital without the need for bank statements or collateral.
On the other hand, alternative loans usually have short repayment terms, high-interest rates, and exorbitant origination fees. Read the T&Cs carefully to ensure it’s the best option for your business.
- Merchant Cash Advances
Small enterprises that are consistently registering strong sales often prefer merchant cash advances to loans. A MCA will give you the finances you need, in exchange for a share of your credit card sales. Therefore, although you’ll be sharing your profits with the provider, you won’t need to deal with recurring loan payments at the end of the month.
Moreover, advances are easier to apply for than loans and take a lot less time to process. If your business is enjoying steady sales and you need funding, a merchant cash advance could be the best financing solution.