Business funding is the act of providing financial capital to a small business to finance a need (i.e. purchase new equipment), to pay for an unexpected emergency (i.e. repair storm damage) or to fund a new project (i.e. expanding to a new business location).
Business owners have a variety of options when it comes to funding their small business. Sources can include angel investors, the U.S. Small Business Administration, alternative finance companies, or even friends and family.
1.) Angel Investors – Essentially, angel investors give you money, and in return, you sell them equity in the company. Angel investments can be a perfect solution for some businesses that are past the initial startup phase, but are still young enough to need capital to grow the business. However, the downside to angel investment is a business owner could be giving away ten to more than fifty percent of their company. The percentage of ownership an angel investor asks for typically depends on how much they’re investing
2.) SBA (7) Loan Program – The 7(a) loan program, from the U.S. Small Business Administration, is their most common loan program for helping start-up and existing small businesses secure guaranteed financing that can be used for a variety of general business purposes. However, the SBA requires yearly financials from the business owner, will secure the loan with property owned by the business owner and could carry hefty fees on the loan transaction. In addition, the SBA loan application process can be lengthy, requiring business owners to supply a cover letter, resumes, business description, SBA forms, financial projections as well as other items.
3.) Alternative Business Loans – Alternative lending sources help business owners access capital quickly while providing flexibility of repayment, including small daily payments that fluctuate with sales volume. Generally, business funding, in the form of an alternative business loan, does not require collateral or for the business owner to have perfect credit. Instead, most alternative lenders measure the business’s revenue and creditworthiness when determining the risk factor of the merchant.
Bizfi’s revolutionary lending platform can help business owners explore their business funding options in minutes. By answering a few, simple questions, business owners can get real offers from multiple lenders. Learn how Bizfi can help your business get the funding it needs.