Show Me the Money: Small Business Financing Options

money for startup, start capital for business concept

Variety of Funding Types Available for Businesses Right Now

For any business to grow, having access to capital is extremely important. Unfortunately, finding investors to put forth equity can be challenging.  Luckily, thousands of financial institutions across the country are willing to provide funding to small businesses to help them grow and develop. This article explores a variety of financing options available to small businesses.

Accounts Receivable Financing

Accounts receivable financing is a funding method in which a business uses its outstanding invoices as collateral for a cash advance. The business owner receives immediate working capital without jumping through the hoops associated with conventional financing options. Accounts receivable financing, also known as invoice factoring, offers several benefits to business owners, one of which is short-term capital to cover pressing expenses. Business owners often struggle to pay their bills during periods of crisis, fast growth, or late paying customers. With accounts receivables financing, they can cover lease payments, utilities, payroll and more instead of making major sacrifices during cash flow gaps.

Line of Credit

A line of credit is a loan that you can borrow from whenever you need money and repay whenever you have excess cash. A line of credit is often a necessity for a business to bridge the gap between when a service is provided and when they are actually paid.  They can be a useful tool for many business owners but can come at a hefty price. They are a debt that will need to be repaid each month so tread carefully as you consider your use of a line of credit. They can be quite costly, so it’s important to read the fine print before applying for a LOC with your bank. 

Short-term Loan

A term loan is a type of loan that has a fixed repayment term and a fixed monthly payment.  A term loan can be used by a business for a variety of needs, but is frequently used to purchase equipment or inventory. The bank will normally provide a term loan with an amortization schedule that matches the useful life of the equipment.  In many cases, a bank will provide up to 100% of the purchase of the equipment as long as the business can afford to make the monthly payments to the bank. acquisition price and will offer amortization periods as long as 25 years.

Bridge Loan

Bridge loans are widely available to companies that need a short-term increase in cash due to a specific event. For example, if your business is relocating to a new site, you may have reduced cash flow until your old site is sold. These loans generally last for less than a month. They are designed to support businesses until they get a long-term financial solution. However, they do tend to come with a high interest rate, so be sure to pay it off quickly to avoid further financial trouble.

Commercial Real Estate Loans

Many small businesses could benefit greatly by purchasing their office building or industrial space, rather than renting as it will allow the business to build equity over time and could actually save money each month. Many lenders will provide small businesses with financing to acquire their property, expand or redevelop an existing property or even build a new one. Lenders may provide financing up to 90% of the acquisition price and will offer amortization periods as long as 25 years.

About Universal Funding

Universal Funding is a private funding source that has funded thousands of businesses and more than $2 billion since 1998. We turn your accounts receivable into the funding you need through invoice factoring and can have capital in your hands in a matter of days.