WorldExecutivesDigest | How To Choose The Right Finance Option For Your Business | Finding the best finance option for your business can seem overwhelming with the variety of options on offer – where do you start when it comes to choosing what’s best for you? There are a few things that you should consider, such as what you’ll be using your money for, how easily you can meet the repayments and your credit history, both personal and business.
Just like personal payday loans, business finance can help you if you need emergency funds due to an unexpected expense. Below, we’ll look at different finance options, along with their advantages and disadvantages.
Benefits of financing your business
Choosing the right finance option for your business is essential so that you can benefit from all that they have to offer. Maybe you’re looking for ways to finance a new project within your current business, or maybe you need equipment for your business to run smoothly, but it is too costly to purchase outright? There are options that make financing your business easy, with access to funds quickly and efficiently.
Business loans allow you to borrow more money than you can with personal finance options, meaning that you can benefit from a substantial cash injection when you need it most. You can decide what you want to use your money on, if you can pay the money back, you can use it to suit you. You can use your finances to improve your cash flow, or you may choose to use them to improve the product or service that your business offers so that you can increase profit.
Below, we’ll look at finance options that are available and how they can benefit your business to help you decide which is the most suitable solution for you.
These loans are often offered to businesses by banks and other financial institutions. They are one of the most popular forms of business finance these days and can be great for established businesses that have good credit ratings. Once you’ve obtained funds for one of these loans from your bank, you have the freedom to choose in which way you’d like to use your funds – no one will interfere or tell you where you can and cannot spend your money. There is also a chance that when choosing a bank as a lender, they will have different finance options suited to a range of different businesses.
Taking out one of these business loans also gives you the chance to improve your credit. If you choose a business loan from a bank, you must make sure that you can make the repayments on time – and if so, you can benefit from lower interest rates on loans you may need in the future.
Sometimes, business loans can have a lengthy application process as your chosen bank will need to check your eligibility, as well as other essential information you provide. As well as this, banks tend to offer business loans to established businesses, rather than smaller, newer companies.
If you’re looking for an injection of funds to specifically help your business purchase specialist equipment, an equipment finance loan could be the best option for you. Equipment finance allows you to purchase the equipment your business needs to thrive, even if you don’t have the money necessary to make such a large purchase outright. It helps to ease the strain on cash flow and helps you to manage your money more effectively. You can keep your business running smoothly, with up-to-date technology, so both you and your customers and clients can reap the benefits.
Merchant Cash Advances
Merchant cash advances are a way of obtaining a lump sum of money but don’t require a lengthy approval process. Lenders offer funds to businesses that apply, and instead of paying it back directly, the lender takes a portion of a business’s takings each day.
This type of ‘loan’ could be a good option for your business if you do not have impeccable credit. The application process tends to be simple and can be done online, so if you are pushed for time, this is perfect for you – it can also be completed online, so you can track your application with ease.
Technically, a merchant cash advance isn’t a loan, you’re agreeing to sell your future profits – so you can adapt your repayments aligned with the kind of month your business is having. On the other hand, it could be said that financing future sales is risky, and a merchant cash advance is only a short-term solution when it comes to improving cash flow.
Business credit cards
A business credit card is another option to choose when thinking about ways to finance your business. It works just like a personal credit card and comes with a range of benefits. For example, it is easy to qualify for a credit card whereas it may be more difficult for a loan. If you encounter cash flow problems, a business credit card can be helpful for smaller amounts, if you can pay it off. It helps businesses to build credit and can help to put them in a better position if they need to apply for a loan in the future – some banks even offer rewards to businesses that make purchases on their credit cards!
With every finance option, there come disadvantages too. A lot of banks require personal credit history for your business to qualify for a credit card, so if your credit is not great, you will be less likely to be given a business credit card. If you make a late repayment, the fees can be high, and interest rates can be on the steep side too.