The Best Way to Find a Finance Service for Your Business Financing a business is always a challenge. Here we’ve compiled 10 techniques, including factoring, from the tried-and-true to the experimental
Factoring
First developed as a technique in 1862 by C.T. King, factoring is a unique form of financing that lets business owners borrow money on their accounts receivable. Many factors are now able to handle smaller business loans, which make it possible to start a business with as little as $500. Factoring also helps you avoid high-interest rates. In fact, the lower the risk the lower the interest rate, which should also be a benefit to your business. There’s no credit check, and if the business doesn’t repay the loan, you won’t have any recourse against the factoring firm. The factoring firm takes your receivables (the sum of your old bills plus your current invoices) and sells them to an investor. The investor is guaranteed that your receivable is liquid.
Bank Loans
Crowdfunding Cash Advance SBA Loans Compensation Incentives Seed Money Working Capital Loans Tech Quicken Another point to consider is that financial companies are now big business. Amazon, Apple, Facebook, Google, IBM, and Microsoft all have various divisions to finance. The more we expand the tech market, the more funds we can generate. Think of it like this: Facebook currently provides $7.1 billion to business owners. This makes up 12.3% of Facebook’s overall revenue. The good news is that there are many different ways to finance a small business. 10-Point Guide to Financing a Business Here’s a quick guide to finding, and funding, a solution for your business.
Equity Investors
If you have a short history and don’t have a huge number of customers, your only real option is a loan. Start-ups are frequently bankrolled by friends and family, and crowdfunding sites like Kickstarter can help start-ups get money for start-up capital and some inventory. Getting finance is not only difficult; it’s risky. If the venture goes sour, your backers can take your entire investment down with them. The easiest way to get financing, though, is through equity investors—wealthy individuals or private investors who invest in startups with a minimum investment of $2,000. These investors are called equity investors because they buy a company’s shares in exchange for money. It’s an investment, not a loan. (If you want to lend money to a venture, you call it a loan.
Grants
The quickest way to get funding for your business is to contact a local SBA office. There are also local Women, Infants, and Children (WIC) or other government grants available. Another source of funds is to work with a private investor and bank to give you cash at a discount. Most small-business owners aren’t aware of this option, but they should look for options to reduce their burden of paying credit card interest and the costs of capital leases. For more information, check out our feature, What’s the Biggest Grant You’re Not Using? Funding Sources To start your search, look at financing sources other than banks, credit unions, and money-lenders. These sources include the following: 1. Seller-financed purchasing loan.
Commercial Loans
Finance deals, especially business loans, always come with a raft of issues. It’s always a bad idea to choose the loan that comes the most convenient because chances are, the terms are more restrictive than you might have wanted. No one wants a small business loan to blow a month’s worth of payroll. So, here are some finance tips that will help you navigate those legal and financial waters: Purchase Order Financing This one is pretty straightforward: if your company uses purchase orders (PO), it’s a smart idea to finance the purchase orders for your vendor. Not only is it cheaper than buying the PO upfront, you get to know the vendors better. Most businesses will make this switch within the first year of opening, but the switch takes more work than simply buying the PO.
Tax Credits
If you run a business that sells, or leases, property, or services, the deduction you claim for rental expenses is based on the amount of rent you paid on that property during the tax year. The deduction does not start until December 31 of the year you sell the property or the property is transferred to someone else, and it ends with the end of the tax year in which the property is sold, or the property is transferred to you. To figure the deduction, subtract the total rental expense from the price of the property for the tax year. If the property is sold or transferred in December of the year you owned it, you only need to estimate the capital gain, and you’ll likely not have any basis.
Crowdfunding
It’s a hotbed of publicity and when you’re a startup or small business you can raise capital from an online community. Don’t wait. Start now with one of these crowdfunding platforms that provide you with the opportunity to promote your business, showcase your product and attract investors.
Angel Investors
The concept of angel investing is a proven investment model with a great track record. Now is the time to reap the benefits of angel investing Growth Capital The traditional business growth fund is typically associated with a startup. It doesn’t require huge upfront funds but instead provides financing in the form of growth capital. Investing in your startup is a win-win Solution-Based Financing Growth capital is the traditional business growth fund and it usually requires a huge upfront funding, which is too risky for most entrepreneurs. Solution-based financing offers longer-term funding without the huge and risky capital infusion Personal Loan The classic business loan is usually going to be too risky for entrepreneurs.
Family And Friends, You Know
A good friend or family member might be your main source of capital, especially if your business is just starting out or it’s been in the works for some time. They might be comfortable giving you a loan, and sometimes that can be a more secure option. Click here for 6 Tips for Finding the Right Finance Source for Your Business Small Business Loan From a Bank Maybe you’re looking for funding from a traditional bank. Or maybe you want to avoid credit card issuers altogether and want to go through a smaller, community bank. This Is Your Money: How To Use the Bank (Not Only The Credit Card) To get the money you need for your business, it’s typically a good idea to have some assets to offer as collateral.
Alternative Funding Sources
As you try to raise capital, you might be asking, “Where can I get the money for my business?” The financing landscape can seem bewildering, particularly if you have your sights set on funding from private or institutional lenders. Many lenders require collateral or you must have active sales, but there are alternatives. “Borrowing against your personal asset — the home — is very much alive,” says Jim Pratley, a small-business consultant and author of The Business Owner’s Guide to Get-Rich-Quick Practices and Practices to Get-Biz-Done Plans. You can get at least $100,000 against a home. “You can borrow against something with a mortgage,” he says. Most banks aren’t interested in small-business loans.
