Do you have plans for expansion? Make sure you have funding lined up. But with so many options available, it can be difficult to pinpoint an option that makes sense for you. We share four ways to finance your business for growth.
When you’re planning for new hires, searching for a bigger office space, increasing your inventory or expanding your business in other ways, cash flow can be a significant concern. Fortunately, there are many financing options available for these types of situations.
We’ve talked about other ways to finance a business, but in this post we’ll cover some more alternative funding methods:
1. SBA loans
SBA loans are small business loans partially guaranteed by the U.S. government, making them less of a risk for the lender you’re working with. Similarly, The Canada Small Business Financing Program offers loans to SMBs that are backed by the government.
These loans come in a variety of amounts with APRs as low as 6.5%. They’re relatively harder to qualify for and you’ll need to meet the following requirements:
- At least two years of business experience.
- A credit score of 640 or higher.
- At least $100,000 in annual revenue.
However, government funding may slow the application process down so you should only apply for these loans if you can wait at least three weeks to receive the funding.
2. Business lines of credit
Sometimes, it’s hard to know how much money your small business needs to cover expenses, which is why some companies opt for a business line of credit.
A business line of credit (LOC) is a revolving loan that gives SMBs access to a fixed amount of capital to meet short-term working capital requirements. Common examples of LOC uses include:
- Repairing business-critical equipment
- Purchasing inventory
- Bridging a periodic cash flow gap
That way, you can borrow what you need without spending the entire line of credit.
3. Equipment finance and leasing
Equipment finance and leasing is a loan designed specifically for companies wanting to purchase new equipment but don’t have the capital to make the investment. The lender lets you use the earnings generated from your new equipment to make monthly payments, cover additional overhead costs and contribute to your profits.
4. Purchase financing
If you have a good credit score, you can use purchase financing to fund a one-time business purchase.
Purchase financing is a short-term funding solution that companies use when there’s an opportunity for immediate growth. They may also apply for purchase financing if they need to take advantage of a bulk-sale offered by a supplier or purchase inventory at reduced rates.
Small business expansion is exciting. Once you see signs that indicate it’s time to grow your business, it’s important you prepare yourself for growing pains.
One of the biggest challenges is how to facilitate growth and avoid unexpected problems that emerge when your business is expanding too fast.
Another setback is the lack of funding to back-up your expansion plans. That’s why it’s crucial to explore different ways to finance your business — such as SBAs, LOCs, purchase financing or equipment financing — and select a funding option that will take your business to the next level.
At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.