Types of Business Financing
Credit is an essential part of any business growth plan. If you want your business to grow, seize opportunities and fill in cash-flow gaps, credit is your best friend. There’s a wide variety of financing types to choose from if you’re a business owner. The key? You need to find a credit option that best matches your needs and objectives.
In this blog, we’re going to talk about how to choose the right credit option for your business.
Credit lines give business owners the opportunity to tap into funds as needed. Since it’s a revolving account, you only pay back what you owe, and you can borrow again as needed––up to your credit allowance. This type of financing comes in handy to cover short-term expenses such as inventory or payroll.
As far as interest rates go, lines of credit typically have a variable interest rate.
Some lenders offer the option of financing equipment purchases such as vehicles, refrigeration units, or packaging machinery. Since equipment financing is a more long-term choice, lenders may offer flexible repayment terms, and in some cases, may not require a down payment.
If you want to avoid accruing debt altogether, consider selling a stake of your business to an investor or a group of investors. With equity financing, you can receive valuable expertise and an introduction into owning a small business. However, the involvement of investors means you will have to share a stake in your business with another individual.
Business Credit Cards
In some instances, credit cards may be the most viable option for businesses. They’re convenient for consistent purchases, and also give business owners the ability to delay payment to save up money for more cash purchases. In addition, credit cards give business owners the opportunity to slowly build credit with on-time, recurring payments.
Many business credit cards offer rewards that accumulate with purchases. These rewards can be extremely helpful for a new business owner who is trying to get their business off the ground.
For more small business advice, visit the Metro Community Development Small Business blog archives!