If you’re an entrepreneur looking for a way to finance a small business or grow an existing company, you’re likely feeling a little lost and confused. Many people have great ideas that could solve problems and meet the market’s needs, but they don’t know how to fund their business idea.
Learn the top financing options for entrepreneurs to simplify the process and help turn your idea into a reality or expand your current business.
MY ENTREPRENEUR STORY
Serial entrepreneur Marsha Kelly shares her entrepreneurial experiences at best4businesses.com.
Before I reveal some lending options, I want to give you an overview of my story and why I am passionate about these financial resources. Although I loved building my company from scratch and watching my returns grow, my limited resources stopped my business from reaching its full potential.
Getting a loan that matched my needs enabled me to take my bottom line to new heights. I could outsource to utilize talent from around the world, improve my branding, and break into other markets. New and exciting opportunities will pop up and promptly disappear if you don’t act fast, and the right lending options can prevent you from being left behind.
Here are some financing options for small business owners to consider.
401(K) FINANCING
You can fund your business with ease if you have money in an IRA 401(k) account, and it’s not as hard as it might sound. In most cases, people need to pay taxes and expensive fees when they withdraw money from a retirement account early, but you can get around that roadblock without much trouble. The way to start, buy, or expand a business with your retirement savings is called a Rollover for Business Startup (ROBS). You can pull $50,000 or more out of your account to launch your business in no time. Find out how to set up a ROBS account.
WORKING CAPITAL
Working capital loans are a valuable tool when you want to grow an existing business. These loans will keep your company on track. You can use them to fund your everyday expenses, such as buying inventory or paying your staff. When your sales slow down and you need a way to keep your head above water, this path could be the perfect solution. You can get the money into your account quickly and you can take this path when you need a short-term lending option. The biggest downside, though, is that your lender will have the right to claim any remaining equity before your investors if you file bankruptcy.
BUSINESS LINE OF CREDIT
If you want to get funds to run your business and plan to do the same in the future, get a business line of credit. Doing so enables you to borrow and repay loans when you need them, and you won’t have to fill out additional applications each time. In simple terms, a business line of credit is a credit card for your business and you can use the funds how you want.
INVOICE FACTORING
Invoice factoring is another great option when you need money and don’t have time to wait. Most companies and small businesses have unpaid invoices sitting around the office, but you can turn them into liquid assets before you know it. Depending on several things, you can sell your unpaid invoices for 60% to 95% of their value and the factoring company will then collect the invoices. Since you won’t get the full amount your customers owe when you take this path, weigh the pros and cons before making a final decision.
LOAN KABBAGE REVIEW
If you’re interested in getting working capital loans, invoice factoring, or other alternative funding options, consider the benefits of going to Kabbage. I have looked at several top review sites to get a clear picture of what you can expect if you opt for this path. As far as benefits are concerned, you can get your funds sooner than you would with other lenders; Kabbage approves some borrowers within a few hours of receiving their application. Learn more about Kabbage loans for small business.
Also, Kabbage will even give you a loan if you have bad credit. When you decide to move forward and take out a loan with this finance company, you can get between $2,000 and $100,000. However, Kabbage compensates for the risk of lending to those with poor credit by raising their fees, and some people pay an annual percentage rate of 99%.
ACCOUNT RECEIVABLE FINANCING
Although a lot of people view account receivable loans and invoice factoring as the same thing, these funding options are different. Learning what separates them will help you choose the option that makes sense for your needs. Learn the difference between factoring and invoice financing, which is rather than selling your unpaid invoices, you will borrow money and use your invoices as collateral.
If someone takes this path and is unable to repay the loan, the lender can collect the invoices to compensate for the balance. The amount you can expect to borrow with account receivable loans depends on a few things. You can give your lender peace of mind if you show that your customers have a history of paying their bills.
MERCHANT ACCOUNT ADVANCES
If you accept credit cards as a payment option, a merchant account advance could be the right solution for you. It enables you to take out a loan based on your average profit. The lender will take a percentage of your credit card payments until you have repaid the loan and closed the account. You won’t need to break your budget to repay the loan during times of slow sales, putting your worries to rest.
CHOOSE THE RIGHT FINANCING OPTION FOR YOUR SMALL BUSINESS
Financial restraints should not stop you from growing or starting a business, and they won’t harm your progress if you follow a proven plan. Keep your needs and goals in mind when you decide what lending option is right for you, and you will be pleased with the result.
About the Author
Marsha Kelly is a serial entrepreneur who has done time in corporate America, selling her first business for more than $1 million. Marsha shares her entrepreneurial experiences at best4businesses.com.