Financing Options Other Than a Business Loan
If you're trying to decide which financing option is best for your business, it can be difficult to know where to start. Maybe you've been considering a business loan - but are there other options? What if the bank says no? In this article, we'll go over some other financing options that may be more feasible for your small business needs.
First, consider whether you'll need the money now or if you can wait a year or two. If you're starting to run low on cash, credit cards could be a viable option. Just make sure that your business is stable enough to be able to pay back the money in a year or two.
Another common option is to borrow from friends and family members. You're likely more comfortable with this idea than you'd think. People close to you can be a good source of capital but proceed with caution. Keep in mind that you're not just borrowing money - you're asking them to invest in your idea. They will expect some return for their money. If you can't pay them back on time or if your business takes a nose dive, they must be willing to cut their losses and walk away. This is why it's important to think of borrowing from friends and family members as a form of investment and not as a loan.
Consider a business line of credit. It's different from a credit card in that it's an unsecured loan. This means that you may not need to put money down, but be prepared to pay interest on your business line of credit. You'll likely be able to borrow a certain amount each month - maybe $500 or $1,000 at first - and pay interest only on the remaining balance.
A short-term business loan might be the right option for you. They'll generally need to be repaid quickly - in two years or less - and often demand higher APRs than other loans, but they're easier to get if your business has less than stellar credit.
Equipment financing is another option. This is a more long-term plan but could be useful if you need to buy specialized equipment for your business. Just be sure to thoroughly research the different options - some may be better than others depending on how much you need to borrow and for what term. The value of the equipment can also be used as collateral, just be cognizant of value depreciation over time.
When deciding which financing option is best for your business, consider your needs as well as what is available to you. A community bank or credit union can help you understand the pros and cons of your options, and supply you with a loan, line of credit, financing, or any other route you decide to take. With a community bank or credit union, you will likely get the best APR on your loan, and you'll build a relationship that can serve as a foundation for future financing needs. Let us play matchmaker and help you connect with the right small bank for you and your business.