Which entrepreneur doesn’t fantasize about starting a business and see it venture to something big without any mishaps?

While this is a great vision, most business owners have one stumbling block: money. In fact, according to SBA (Small Business Administration) in a 2020 report, small business owners borrowed $645 Billion to help support their businesses.

When the need for money exceeds the cash-at-hand, many areas are negatively impacted, and you need a plan B. Here is the good news; there are many financial solutions that you can opt for to help you evade the financial hitches caused by inadequate funds.

Here are some of the best financing solutions that you can approach.

The Different Types of Small Business Financing Solutions

You can never run short of small business financing options for businesses. However, each has different policies, and not all of them are perfect for your business’s financial needs. Take time to understand the types of financing for business and it will help you pick the best. They include:

SBA Loans

SBA is a loan program ideal for business owners who want a low-cost government loan. Additionally, they are recommendable if you have a good credit score and you need a long-term loan.

Unfortunately, they have many qualifications and take a long time to process. The loan can take about three months after you apply, meaning they are not a solution if you need urgent financial assistance.

Term Loans

Term loans are loans where you receive a large amount upfront and repay it with interest over time. They are the best business loans if you need a large amount of money for reasons such as business expansion.

To get these loans, you need to have a good credit score and a well-established business. Term loans may have higher costs when compared to other loans such as bank loans. Additionally, you may require collateral or a personal guarantee to get these loans.

Invoice Financing

Invoice financing, which is also called accounts receivable financing, involves getting advances from your lending companies. They give a quick cash advance of about 85% of your invoice. 

When you receive your payment, you get the remaining percentage minus the weekly charges from the invoice financing company.

This is the best financing solution that can help avoid inconveniences caused by late payment from a customer. Additionally, the lender checks the customer’s repayment behavior and not yours, meaning that a poor credit score cannot affect you. 

Business Credit Cards

Business credit cards work like personal credit cards but are designed only for use by the business. They have lower interest rates than personal credit cards. 

To get these credit cards, you and the company ought to have a good credit score. They will be situation-savers when you need a small amount within a short time.

Traditional Bank Loans

Bank loans are by far the oldest and most used form of business financing. Most people prefer them since they have lower interest rates and better repayment terms than other finance options.

Banks are the best financing solution if you need to borrow a considerable amount and pay it back in a long time. Unfortunately, banks have a rigid qualification criterion, making it hard for most people to use them.

Financial Requirements When Lending From Banks

As mentioned above, banks have many considerations before lending you a loan. Some of these things that you need to have to get a business loan from a bank are:

 i. Collateral – Your business needs to have assets that you can use as collateral to get loans from banks. This is why some banks don’t give startup business loans since most have asset based lending.

 ii. Details Of Accounts Receivable – These include payment and sales history, account-by-account information, and aging.

 iii. Business Plan – This one is meant to help better understand the business. Even a summary or lean business plan is enough.

 iv. Purpose Of The Loan – Some banks may demand to know what you need the loan for, especially those that do not give loans to clear debts. Reasons that may help approve the loan include purchasing inventory, purchasing equipment, improving cash flow, and using it as payroll.

 v. Financial Statements – You may need to show your balance sheets, profit and loss statement, income statements, and cash flow statements for a given time. They may also need to see your bank balances.

Business Requirements for Alternative Financing Options

Alternative financing options are all other non-bank options through which you can get a loan. Unlike banks, these do not have a lot of requirements to help you get the loan. Additionally, the requirements differ based on the alternative financing option that you choose.

To help you know what you need, ask questions such as how do small business loans work, and their answers will help you prepare the requirements.

The Benefits of Alternative Financing Solutions

Some of the reasons why alternative financing solutions are better than traditional banking loans are:

 i. Approval, Even on Bad Credit – While banks insist on good credit, it is not a must-have in most alternative financing solutions.

 ii. Unsecured Loans – You don’t need collateral to secure your loan to get the best financing solution.

 iii. Rapid Approval – You can get the loan even within hours after you send in your application.

 iv. Short Payback Period – You pay back within a short time, thus reducing debts and financial pressure on the business.

Where to Find Business Financing Advisors to Help

When thinking of how to get a small business loan, it is not easy to select the best choice among the many available. Your best bet is to get a financial advisor for advice on choosing the best financing option. Some of the ways to find an advisor are such as:

How to Apply and Get Offers

  • Choose your loan type – you can choose the best financing solution based on the amount you intend to borrow and the use of the loan.
  • Complete the loan application – after you narrow down to your ideal financing option, gather what is needed and apply.
  • Make your case – prove to the business loan lender why your business is worth the loan.
  • Wait for approval – ask the lender how long you need to wait before receiving the loan and wait.

Get a Financial Solution for Your Business!

Don’t wait to see the effort you have put in your business go down the drain due to financial hurdles. Instead, please choose any of the above financing options for businesses and use it as a bridge over this troubled water of finances.

Consulting a financial advisor will also help ensure that you don’t get a financing solution that ends up causing more harm than good.

About the Author, James Webster

James Webster, founder and CEO of ROK Financial has almost two decades of experience within the financial services industry. His passion for helping small business owners and his innovative way of thinking, has allowed him to run multiple successful businesses including National Business Capital & Services. Under the National name, the team was able to help secure over $1 Billion in financing for small businesses nationwide.