One of the primary challenges that business owners face when starting their companies is getting sufficient financing to keep it running and expand it with time. There are several ways to finance a startup, and they come with their pros and cons. Some financing means are more favorable than others, and it takes due diligence and proper planning to know the appropriate ones to consider.
Usually, when someone is about to start their enterprise, the first financing option that comes to their mind is small business loans. Interestingly, there are other financing alternatives you can consider that will keep your company in operation.
Here are some business financing you can consider getting for your venture
Small business loans
A small business loan provides the entrepreneur with access to capital to get the enterprise running and also sustain it. A startup loan can be used to fund equipment purchases, hire and pay staff, fund inventory, supplies, and other items vital to the organization. If your enterprise is seasonal, having a small business loan will cover your expenses.
If you have great products and services to offer, and you need regular customers, you need small business loans to push through. You can get this funding type easily from banks, government, and trusted online lenders that offer favorable rates.
ITIN loans are for startup owners with an ITIN number and no Social Security Number. The beauty about ITIN loans is, you can get them for your startup even without legal immigration status. Usually, when you need business financing, building a credit history is crucial. Since several financial institutions accept ITIN during the identity verification phase when giving loans, it might be your opportunity to start building a good personal credit history.
So, as you perform more successful transactions with your ITIN, your credit history becomes stronger.
Merchant Cash advances
A merchant cash advance is a business financing type that provides company owners with flexible access to cash. The lender gives the business some money which is refunded via customers’ card payments.
One of the downsides of this financing method is the high interest rates. A new venture owner might find this disadvantageous because, at a business’ inception stage, there are many things that need funding, and paying back voluminous interest rates can affect company plans.
Even though merchant cash advances help businesses to curtail temporary cash problems, it is not a good long-term solution because your profits are being affected daily.
With credit cards, business owners in America can benefit from building good credit, protection from fraud, cashback benefits, etc. However, if it is not managed properly, it can lead to huge debts. Even though credit cards make life and business easier, it is a big burden on the spender.
Credit cards have a higher cost of borrowing than conventional loans, as many of them have a high annual interest rate premised on borrowed funds, late payments penalties, and service fees. If you miss a payment on any month, these extra charges increase your present debt.
Personal loans can be beneficial in startup financing. They have high interest rates, and how you use them determines if your credit score will be affected or not. Most times, personal loans don’t need collateral, so you won’t risk losing any vital asset. However, if you default on payment, it can damage your credit score, and you will pay high fees and penalties.
Taking loans from family members can be considered for business financing because of the flexible payment options and lower interest rates. Also, it can cause irreconcilable differences if you don’t pay when expected. More so, family loans have no legal protection. A family member can decide to abnegate the initial loan repayment agreement to something that suits them.
Starting an enterprise is expensive, and financing it is the most important financial choice many owners make. Your decision to fund your business determines its health in the long run. With the financing options mentioned in this piece, like small business funds, you will be well guided when you arrive at this crossroad.