With small business financing, you may be able to save your business during slow periods. You can also keep your business growing with the right financing options. Here is what you need to know about small business financing and how to choose the right options.
When to Look for Funding
The answer to when you should look for small business funding is going to be different for each business. Most business owners know when it’s time to look for funding options. Often, a small business will look for funding when it doesn’t have enough money to cover basic expenses. 82% of small businesses will fail because of a lack of cash flow. Funding helps keep you from being another statistic.
You can use business funding for the following expenses:
- Inventory
- Staff hiring
- Equipment
- Working capital
- Additional locations
- Debt
It doesn’t matter why your business needs the money. Small business funding will help. The next step, once you know it’s time to look for funding is to know what to look for.
What to Look for in Funding
When trying to decipher what type of business funding you need, you have to look at your finances. Figure out what your business is spending and figure out where your business will be months from now. When you do this, you can estimate how much money you’ll need. Several factors affect the type of funding that you need. You will have to consider the following:
- Time frame
- Amount necessary
- Independence
- Industry
- Connections
You need to keep in mind that some financing options will take longer, some will have more control over your debt and others will depend on the connections that you have. Funding comes in two different categories. There is debt funding, that is essentially a loan and then there is equity funding where you give up partial ownership of your company and control for money.
Many people choose traditional term loans. Business loans may be from a traditional lender or you could receive a loan from a personal lender. Another option is the SBA loan. This is from a bank, but the loan is guaranteed by the SBA.
When it comes to funding, you have to know what to look for. There are so many different small business funding options that it might be intimidating at first. However, when you look at the conditions of your business, the decision may be easier.
