If you dream of starting or expanding your business, the cash at hand may be inadequate to meet your budget. In that case, you’ll need to reach out for the best financing options to fund your startup or expansion budget. As a business owner, you need to understand these funding sources and the associated costs with Best Financing Option. In this blog, you will know about Selecting The Best Financing Option For Your Business.
Besides, you need to know the eligibility criteria for the different financing options. This will save you time and money. For instance, if you’re an immigrant who isn’t eligible for a Social Security Number, you can apply for a loan with an ITIN number. In that case, you’ll need to find out which banks offer loans with an ITIN number.
Read on to learn how to select the best financing option for your business.
Common And Main Requirements To Obtain Financing
To receive funding, lenders and investors will require that you avail the following information:
- Your borrowing purpose: Clarifying if you’re borrowing to grow business, acquire equipment, increase inventory, or support your payroll shortfall.
- A business plan that outlines your strategy to translate your idea into a profitable enterprise.
- Personal information such as SSN. If you’re an undocumented immigrant and need financing, you’ll need to get an ITIN number to apply for an ITIN loan.
- Credit history; having an excellent personal and business credit history is a perfect comfort to lenders.
- Business and personal financial statements.
- Cash flow.
- Your business experience.
- Collateral; collateralized loans attract lower pricing as lenders perceive them to be less risky.
- The current level of debt; it’s harder getting financing approvals when your business is overly indebted.
Best Types Of Loans For Your Business
Here are the types of loans that you can secure to start or grow your business.
SBA loans
Small Business Administration (SBA) loans are guaranteed by the government and are priced to please with low interest and fees. The downside is they’re unsuitable for emergency borrowing as you can wait for up to three months to receive the funds.
Term loans
The lender advances you a lump sum that you repay over a specified term with a fixed monthly installment consisting of the principal and an interest component. You can use a term loan for a wide range of needs like buying machines and purchasing inventory.
Microloans
Microloans are typically loans that can go up to $50,000 and are ideal for new and small businesses. Fintech companies, the SBA, and nongovernmental organizations are top sources of microloans for businesses.
Commercial mortgages
Commercial real estate loans finance the purchase, expansion, or renovation of property for commercial purposes.
Franchise loans
Rather than start a business from scratch, you can purchase a known franchise. A franchise loan helps meet the upfront costs of starting a franchise to enable you to take off with ease.
Invoice financing and invoice factoring
This is a case where you use your unpaid invoices as collateral to receive financing from a lender. This type of business loan is also known as government factoring if your invoice is from the government. The lender advances your business a portion of the invoice amount that you’re owed. They then collect their principal and interest when the
invoice is settled.
Equipment loans
Equipment loans are meant to assist you purchase equipment such as motor vehicles, machinery, office equipment, and fixtures. The equipment you purchase serves as collateral for the loan.
Grants You Need To Know To Get Funding
Grants are free money from the government or private entities aimed at stimulating economic growth in specific sectors. For that reason, they’re highly competitive and not always easy to get.
Before you can apply for funding, you need to know the eligibility criteria. This will help you to only apply for grants that you stand a chance of getting. To learn more about government grants and the applicable standards, go to Grants.gov.
You can also check out FedEx Small Business Grant Contest and National Association for the Self-Employed grants from private corporates.
Other Options To Obtain The Money That Your Business Needs
- Borrowing from family and friends
- Equity financing
- Crowdfunding on platforms such as Kickstarter, Prosper, and Indiegogo
- Venture capitalists
- Angel investors
Conclusion
When you need financing:
- Explore financing options that are cost-effective and appropriate to your business needs.
- Ensure you fit within the eligibility criteria so as not to waste time. If you’re an immigrant without an SSN, you’ll need to apply for an ITIN number to process an ITIN loan.
- Reach out to the ideal financing option today and grow your business.