6 Financing Options for Small Businesses
Even if you don’t need to borrow money for your small business now, there’s a good chance you will in the future. That’s why knowing small business financing terms is such a good idea.
- Business credit score: Most consumers understand the concept of a personal credit score and have obtained it at least a few times. Your business credit score is different in that the range is only from 0 to 100. Be sure to request yours at least once a year so you know where you stand should you need to apply for credit. As it can take years to build a good score, be sure you have other evidence in your favor such as history of a strong cash flow for your business.
- Business line of credit: This type of small business financing gives you the capital you need only when you need it. You borrow against the account and only pay interest on the portion of your credit line that you use. In can make a good stop-gap for those periods of low cash flow or when you would like to invest in more equipment or employees.
- Business term loan: With a business term loan, you receive a lump sum of cash to spend as you see fit. You typically pay back this loan with interest over a period of one to five years. You may need collateral for approval depending on your business credit score and how long you have been in business.
- Equipment loans: The cost of purchasing a large piece of new equipment can be more than you can manage without a loan. Loans specializing in equipment only tend to be easier to qualify for than term loans.
- Income statement: You should plan to have this with you when you apply for any type of small business financing. It shows your business profit and expenses over a specified time.
- SBA loan: A loan from the Small Business Administration typically comes with more favorable terms than a bank loan. You may have as long as 25 years to repay it.
Please don’t hesitate to contact ASA Capital with additional questions.