3 Ways to Get Financing for your Small Business

While sufficient cash flow is obviously important for business of all sizes, it is especially vital for small businesses that typically don’t have reserves they can tap into when revenues temporarily dry up, or the ability to raise funds through investors. And as many entrepreneurs have discovered, applying for a conventional bank loan, maxing out on credit cards, or trying to push through a “friends and family” round of financing (maybe not for the first time) usually aren’t successful tactics.

Fortunately, there other ways for you to keep your small business dream alive, and put your operation on track for a strong, successful future. Here are three options that could fit the bill:

  • Working Capital Loan

A working capital loan is a cash infusion — typically for a longer-term investment — that is paid back through regular monthly payments. Unlike conventional bank loans, most firms that offer working capital loans won’t reject your application if you have bad credit, a past bankruptcy, or if your business hasn’t been profitable (or very profitable) in the past. What’s more, collateral isn’t required as part of the deal, so you don’t have to put your personal and/or business assets on the line.

  • Inventory Financing

Inventory financing is an asset-based lending product that allows you to use inventory as collateral to secure a line of credit. This type of funding may be your best option if you have a temporary, short-term cash flow shortage. You’ll be charged interest on the amount you borrow, and not on the full amount available.

  • Business Line of Credit

Like inventory financing, with a business line of credit you’ll only pay interest on the amount that you borrow. However, there’s no collateral (i.e. it’s unsecured). Many businesses opt to have line of credit available “just in case” an urgent need for cash arises, such as a time limited golden opportunity (e.g. a chance to purchase inventory or equipment at a major discount, a last-minute invitation to get a booth at an important trade show, and so on).

The Bottom Line

Running a small business is challenging enough; especially since there’s no such things as a 9-5 workday, and “weekends” should be re-labeled as “weekextensions” — because that’s what they are. But at the same time, you wouldn’t trade your experience for a tour (or another tour) in the cubicle jungles, or for the chance to work yourself to the bone to make other people wealthy. You’re in it to win it. And the good news is that the funding options noted above can help your small business make it to the top — and keep you there, until it’s time for your well-earned and well-funded early retirement!

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