Small business funding is not just a tool for startup entrepreneurs. Even established business owners understand that it can be a valuable financial tool that can provide benefits at any stage of a company’s life.
In this article:
How to Know if Small Business Funding is Right for Your Company
First, you might wonder what you can use financing for. Here are a few of the business needs that funding might help you with:
Cash Flow
Business financing can provide fast cash for small business owners who need extra cash on hand. The funds from funding like a business loan or working capital, can be used to secure a business location, purchase inventory, repair equipment, or hire employees.
Growth
Business financing can enable the growth your company needs to achieve its goals. A small business loan or funding can facilitate physical and financial expansion by providing the funds needed to expand your current location or secure brand-new office space. Small business financing can also help a business grow by financing a new marketing campaign or experienced talent.
Credit score
Securing business funding contributes to building a healthy business credit history. On-time payments positively impact a business’s credit score. Lenders and investors analyze a business’s credit history. A higher credit score will open doors for future funding opportunities and make the company more attractive to investors.
Opportunities
Business financing provides fast funding that can be necessary for some unique opportunities. Whether it is purchasing bulk inventory at a discounted rate or exploring a time-sensitive franchise opportunity, timing is everything. If a potential business opportunity has a positive return on investment, the cost of business financing is a worthy investment.
Related: What to Do if Your Small Business Lender Stops Funding
The best types of small business financing
There are several funding options available, and none of them are “one size fits all.” Choosing the right option depends on your business’s history, needs, and eligibility. Entrepreneurs can choose to work with traditional lenders, like national banks, or online funders, like Biz2Credit. Online financing providers typically offer more funding options as well as an easier application process and faster approval times. Financing terms, including interest rates, financing costs, and repayment schedule, vary depending on the type and total amount of the funding. The most popular small business loans and financing include the following:
- Business term loans – traditional loan where the borrower receives a lump sum of cash upfront and pays the loan back with monthly payments of principal and interest. Term loans can be fast funding, short-term loans or long-term commercial loans. Term loans are great for business owners building better credit history and can be approved up to $400k in less than 24 hours with the right funder, like Biz2Credit.
- Equipment loans – available for up to 100% of the new equipment’s value, equipment financing often requires no down payment. The amount of the loan and the repayment plan are by the useful life of the equipment, which keeps monthly payments low. Equipment financing can be used to purchase machinery, computers, software, vehicles, office equipment, and more.
- SBA loans – business loans guaranteed by the Small Business Administration (SBA) provide several loan programs for entrepreneurs that want lower interest rates without strict credit requirements. There are many types of SBA loans, which dictate the maximum loan amount, repayment terms, and permitted use of the funds. The most common types of SBA loan programs include the SBA 7(a), Microloans, disaster loans, and SBA Express Loans.
- Business line of credit – revolving credit like a business credit card, but with more attractive terms. A line of credit works when borrowers are approved for a set amount of money that they can draw on whenever they need. Monthly payments include interest and are determined by the amount of funds used, not the total amount of the credit line.
- Working Capital Financing or Merchant Cash Advance – an advance on future credit card sales that is repaid using a percentage of future credit card sales. Because repayment is tied to sales, you pay more when you earn more, and less when you earn less, making it a flexible and attractive option for many small businesses.
How to get approved for small business financing with no upfront costs
Whether you are considering small business financing to cover startup costs, help with operating expenses, free up cash flow, make a large purchase, or build good business credit, the process is quite simple when you are prepared. Getting approved for financing will require the following steps:
- Choose your target amount – Think about the business needs you are wanting to meet with financing and estimate those costs. For large purchases, like equipment or machinery, the total financing amount will be the value of the new equipment. If the loan or funding is intended to cover ongoing expenses, use the previous month’s income statements and the future month’s budget to estimate an amount that will cover those costs. Working with a financing provider like Biz2Credit can help you to estimate the amount of the monthly payments so that you can be sure the new financing will fit into your budget.
- Choose a financing provider – Decide whether you’d prefer to work with a traditional lender, like a bank or credit union, or an alternative, or online, financing provider. Online funders typically offer an online application, various financing programs, and fast funding. At Biz2Credit, small business owners can get approved for funding up to $400k with no upfront costs in as fast as 24 hours.
- Gather required documents – Each financing provider and type of funding will require its own set of financial documents. Preparing some commonly requested documents like income tax returns, business credit report, financial statements, and a business plan will help expedite the application process.
- Apply and get funded – Online funders, like Biz2Credit, offer an easy online application process. Completing the online application takes as little as five minutes and involves completing a questionnaire and providing business documents. Statements can be uploaded as attachments or automatically by connecting your business bank account to your online funding portal. Once approved, the funds will be deposited into your business bank account within days.
Bottom Line
Small business financing is a great tool for entrepreneurs in a phase of their business goals. Financing provides the capital needed to get started, stay current with operating expenses, cover unexpected purchases or costs, or expand. Getting small business funding is easy with Biz2Credit because the entire application is online, requires no upfront fees, and can be funded in as little as 24 hours.
Learn about the Biz2Credit financing process
