Business finance – what are your options?

business finance solutions

Growing your business is easier said than done. Whether you’re just starting out and looking to build an idea, or you’ve been open for years and want to accelerate to the next level; it takes a lot of hard work and money.

It’s impossible to see any growth if you don’t have access to the right amount of funds. Part of growing a business revolves around investing in new ideas that improve your company in some way. So, what happens if you don’t have enough money to do this?

The best approach is to look at the different business finance options out there. By utilising these, you will get the money you need to fund your growth. In today’s article, we’ll look at all of the most common and popular methods of financing a business.

Business Loans

This business finance option is popular for its convenience. A business loan is simple; you submit an application to a lender, and they give you the money you need. Then, you pay them back over time depending on the terms in the contract.

Of course, there are plenty of things to consider here, such as your credit score, business plan, and any requirements laid out by the lender. Some business loans are unsecured, which means you can get one without putting anything up as collateral. But, others are secured, which usually means your business as collateral in case you fail to make repayments. Should you go bust and miss repayments, the lender takes your business and will probably sell it to get their money back.

Invoice Finance

Invoice finance is a good option for businesses that have a lot of invoices which aren’t providing them with immediate funds. Here, you can sell your invoices to a private company who will buy them from you right away. This gives you instant cash to invest in things to grow your company.

Another method of invoice finance is to borrow money against your accounts receivable. This means you borrow from a lender and then use your invoices to pay off this debt when your customers eventually pay you.

Peer To Peer Loans

This method is very similar to a traditional business loan, but the difference lies in who you get the money from. Here, you will borrow money from individuals rather than a bank or loan company. You do this via a website, and the money you get could come from multiple sources.

As with a typical loan, you need to make regular repayments to the lender with interest added. The benefits of this method are that you often get cheaper loans and there is no minimum limit. The downside is that there could be significant fees and charges if you miss payments, but this is still a good option if your business can’t get a loan from a bank or building society.

Crowdfunding

In an ideal world, this would be the solution to everyone’s business finance problems. Crowdfunding is simple; you ask people to donate money to your business. To do this, you need a tantalising pitch that makes people certain they need your company in their lives. Often, it’s advised to give doners some incentives like free products or exclusive lifetime discounts.

The best thing about this is that you’re not in debt to anyone. The bad thing is that it’s tough to raise the capital you need, and it can take a very long time.

Merchant Cash Advance

With a merchant cash advance, you have a variation of an unsecured business loan. Essentially, your business can acquire money at short notice and then use this to support your cash flow and grow your business.

The main difference is that you use future card sales to pay back the loan. There are also no interest rates or hidden costs, you agree on a fee when you borrow the money. The only negative is that these cash advances have to be paid back in a matter of months, and they depend on your sales. So, if your business is struggling, then you might not be able to pay the costs on time.

Asset Finance

Lastly, you have asset finance. The basic definition is that this is a way to borrow money that gives you access to the assets your business needs. Instead of paying for new equipment with cash, you can use asset financing to cover the costs and then repay them over a more extended period.

Many people see this as an alternative to renting assets as you get what you need but can pay for it over instalments, rather than all in one go.

If you need to grow your business, then consider these different finance options. Each one has its pros and cons, so work out which idea will be best for your organisation.