Starting off with a business of your own can indeed be an expensive and intimidating task but that doesn’t mean that you have to drown in massive debt amounts or need investors to invest their funds in your company. Yes, it is true that there are venture capitalists available but bootstrapping is indeed a good idea when that is possible by the would-be entrepreneur. Finance can indeed seem to be one of the complex discipline which are full of tough concepts but actually it is not so. Have you ever wondered how a company decides whether it should fund itself with debt or equity? Well, while you can do both, it is anytime better to rely on your individual assets so that you don’t remain liable to the organizations for money.
The novice entrepreneurs are all having a business idea in their mind but when they’re thinking of starting off, they are getting confused about the steps to take regarding money. While they don’t have enough funds with themselves, they are even wary about whether or not to borrow money from the lending institutions. If you too are in such a situation, you need not fret as there are ways in which you can finance your business without falling into high interest debt.
The wide array of choices available to you
Stretching the working capital of a company through different forms of debt can just be a good resource of extra cash. It can help the businesses generate better marketing programs and manage their customers. The trick to securing debt is initially exploring your options which you have for funding. Your job is to learn the types of best matches and customer activity. Here are some alternatives left for your business.
- Business loans backed by SBA: The SBA or the Small Business Administration offers different loan programs for the startup business firms and the businesses that are in their advanced stages. The first vital thing to know is that you can’t apply directly to the SBA for a loan but instead you have to speak to a local bank which participates in the SBA loan program scheme. Some of such loans offer long term financing for real estate and manufacturing programs. There are some other business owners who open franchise outlets to start off with their own business. You have to abide by strict underwriting guidelines and hence it is not pretty easy to get such loans backed by the SBA.
- ABLs or asset based lenders: As the name suggests, it goes without mentioning that the range of ABLs or the financial companies which offer asset backed lending are much broader than what people realize. This is indeed good news for the business owners who might have been denied by the big banks and their strict lending requirements. Asset based lenders offer you funds against the account receivable of a company or the equipments or the inventory. Here you might face some lenders who are more aggressive than the others and there are some that will create no such issue with regard to lending funds. However, one thing to be sure of is to offer accounts receivable which is eligible.
- Financing based on revenue: RBLs or revenue based loans are a recent type of loan which has been brought into the market very currently. Such financing options are better for the companies that are growing and for those that don’t have too many hard assets to lend against. The companies receive an advance of around 10% of their previous year revenues. Hence, if revenues are growing, then the payments to the RBL lenders increases and with declining revenues, the payments will also decline.
- Microloans: Microfinance companies that now operate in about 50 states in the US, offer small loans to the struggling business firms. The rates that they offer are usually below that of the small business credit cards. Such loans are offered mostly to the first time business owners and to those entrepreneurs that have a poor credit score. Loan amounts can vary from $500 to a whopping amount of $40,000; however the average microloan that is usually borrowed is around $2000. Such loans can be a great option for those entrepreneurs who still require buying an office, computer and other infrastructure. If you have one such company, you can certainly opt for microloans.
After taking out financing options from the above mentioned lending institutions, if you see that due to some unfortunate incidents you’re not able to repay the debt, you may take help of the business debt repayment options. Business debt restructuring in the form of new consolidation loans and business debt settlement are all good options. You may click here to know more debt relief options that are available for indebted businesses.