Many business owners dream of taking their new company from their home office to a large, well-known organization that turns a handsome profit. However, getting from Point A to Point B, in this case, takes more than just hard work and dedication. It also requires that you have access to growth capital. This term describes funds your business uses to grow its operations and eventually its profitability. Because it can sometimes be challenging to know where to apply for business financing, we outline some of the most popular options below.
Asset-Based Bank Loans
Private banks typically like to see a business have significant cash flow as well as valuable collateral before a lender will approve any request for business financing. Asset-based loans are typically for a shorter term than other business loans and come with higher interest rates and the requirement to offer a valuable piece of collateral. While these circumstances aren’t always ideal, they may be the only option available to cash-strapped organizations.
Cash Advance through Invoice Factoring
This type of business financing involves selling unpaid invoices to a factoring company to obtain a timely cash advance. The buyer holds back some of the value of the invoice to cover its fees and to ensure that your customer will repay it on time. It can be ideal when you haven’t established a strong enough credit history to qualify for more traditional types of business financing.
Financing through the Small Business Administration (SBA)
Obtaining a loan through the SBA is attractive for many business owners because it often comes with longer terms, lower interest rates, and lower monthly payments than standard bank loans. Although you receive the loan from a bank, the SBA backs a high percentage of it to reduce the risk of default to the lender. The most common uses of an SBA loan include:
- Business acquisitions
- Construction costs
- Expansion costs
- Revolving funds
- Start-up financing
- Working capital
These represent just three of the numerous business financing options you have available to you. Please contact GP Solutions to learn more.