When it comes to business financing, there are many options. Traditional loans work for some businesses, while others may use credit cards or factoring to finance their operations. Government grants are available to some small business owners, especially if they are a minority or their business is part of an industry that is in demand. Some business owners choose a single source of financing, but most of them combine several funding sources to keep their business going.
Business owners who are looking for financing usually start by asking their bank for a loan. It is best to start by talking to a loan officer at a bank you have a long history with because they will probably be more willing to loan you money than a bank who is looking at you as a set of numbers instead of a person. It is a good idea to go into the bank with a copy of your business plan as well as your business’ financial records for the past year. Think about the questions that a loan officer is likely to ask you and rehearse your answers to the questions so that you sound confident and trustworthy by the time you are meeting with the loan officer.
Factoring is the act of selling the business’ accounts receivable invoices for immediate cash. The factoring company usually takes a certain amount of money and pays you the remaining balance due within a few days. The company then sends your customer a bill for the entire balance of the invoice they owe you. Many businesses use this tool because it is quick and can provide a consistent source of income as long as you have customers that owe money to your business. Some people think of this as a loan, but it is simply an advance of most of the money the company is owed.
Businesses with good credit often use credit cards to finance their operations. There are many advantages to using a business credit card. One is that credit card purchases are very safe. They also send monthly records of everything that is charged to the card, making it easy to track the business’ expenses. Some credit card companies even offer cash back, airline miles or other rewards to their customers. Another advantage of using credit cards is that they can be given to employees to be used for expenses such as gas and motel rooms.
Grants may be available to small businesses through the state or federal governments. There are very strict requirements for these grants, so it is a good idea for business owners who would like a grant to contact the United States Small Business Administration for information about grants their business may be eligible for. Local governments often offer grants to businesses that will boost the local economy. The federal government does not offer business grants, but they do give money to foundations, who often offer grants to small businesses. Some corporations even offer grants to help small businesses and give back to the community. It is a good idea to apply for every grant that your business qualifies for, even if you don’t think you have a good chance of receiving it.