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Financing Your Business : Are you aware of your options?

| February 24, 2019
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Everyone who’s started a business, whether a franchise or from the ground up, knows one of the most stressful parts is figuring out how to raise capital to create the business. Whether you use personal savings or a loan from a bank, we all have experience with the unknown.While talking with a few experienced business owners, I raised the question of start-ups. I asked each of them, “If there was one process that someone could have helped you with, what would it be?” To my surprise they unanimously wished someone had guided them with start-up financing.

Not being a complete expert in this field, I began researching all I could on the topic. While there are many ways to obtain financing,it seemed there were 3methods that might bebest suitedfor business start-ups.

1. Personal Loans - While personal loansare viable in a variety of circumstances, not everyone knows that you can obtain a one to start your business. What makes personal loans attractive is that you can obtain one fairly quickly. That said, don’t let access to quick cash fool you.These loans typically come with high borrowing costs and smaller amounts. In addition, banks also require a start-up to have business history as they don’t lend money to brand new companies. Personal loans also require a business owner to have a great credit score. For this reason new business owners looking to acquire funding this way should sign up for a small business credit card. By usingthis card tobuysupplies and continuing expenses,you create abusiness credit score which should help when applying for a loan.

2. Term Loans - Business owners looking for larger loan amounts should consider term loanswhich can be obtained throughonline vendors such as Lendingtreeand banks in amounts up to $1 million. Term Loans are a good option if your business needs immediate access to cash and the online vendors typically process the loan faster than a local bank.While online vendors may be quicker, they tend to charge higher interest rates than local banks. Term loans may also require business owners to guarantee repayment through collateral.

3. Equipment Loans - If you have a business that requires a lot of equipment to start, an equipment loanis most likely where you will look first.A benefit to this type of loan is that you retainownership of equipment at the end of the repayment period. While this sounds great, you do have to take into consideration the potential downside. Equipment depreciation may make the loan repayment more costly to the owner. While you may own the equipment, payments could last longer than you’d like.

There are many options for financing and you should always consult an expert before making any decision. Financing your business is most likely going to be a long term commitment and you should always know the pros and cons before entering into a loan contract.

For Questions or to learn more on this topiccontact Jon Gyles at: jon@ewmginc.com

 

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