This fact is harsh but true: Growing a business requires money—often a lot of it. Many small business owners find themselves daunted by obtaining the capital they need for business growth. However, there is no need to despair: As this article shows, there are many ways to access the necessary capital.
Traditional Bank Financing
Traditional banks are one potential source of capital for business growth. Businesses often use bank loans to buy real estate, refinance or consolidate debt, and buy equipment. All of those can smooth the growth process, whether by cleaning up the business’s finances or by increasing its resources. These loans typically have interest rates of 5 to 8 percent and terms of 3 to 25 years.
Businesses that have trouble obtaining a loan from a bank may find more success working with the Small Business Administration (SBA). The SBA does not loan money directly, but it does work with lenders to facilitate agreements with small businesses. For instance, Ijeoma S. Nwatu explains that CDC/504 loans can be used to make large purchases and improvements, while the SBA microloan program can give access to up to $50,000 for equipment and other items.
Merchant Cash Advances
Merchant cash advances are typically used for short-term growth needs. With these, a company sells part of its upcoming receivables for up-front payment. This financing option makes sense if the resulting business growth will boost revenue by an amount that is larger than the cost of the merchant cash advance.
Alternative lenders are another powerful source of financing for business growth. Examples include non-bank lenders, private lenders, mid-prime alternative lenders, and marketplace lenders. These lenders’ offerings tend to have shorter repayment schedules than other types of financing, but they can still have an amortization period of up to five years.
Want more tips on taking your business to the next level? Just take a look at Nations Capital Financing’s other blog posts.