Three Ideal Lending Options for Small Businesses
It’s challenging enough for small businesses to get the required financing to start a new business let alone get approved for a loan to cover additional business ventures or maintain yearly operation costs. From short-term business loans to merchant cash advances, many choices are available and according to the Bank of America, here are three ideal financing options to consider for your business.
- Business Credit Cards
An article on bankofamerica.com reports that if a small business or start-up requires less than $50,000 of capital and a loan from a lender is not an option, a business credit card may be an ideal choice. Not only do they provide a stream of revenue when needed, they can strengthen credit history (if payments or balances are paid diligently), offer certain perks with point systems, and help maintain financial records.
- Business Line of Credit
While not ideal for long term investments, a business line of credit also provides a stream of revenue for daily operations including payrolls, equipment maintenance, or inventory. Even though a small business has to get approved for a line of credit (with all the proper documentation required), it may be easier to obtain than a short term business loan or other type of loan.
- Small Business Loans
Small business loans are always available for the right applicants, especially for those with sound financing, a solid business history and strong credit. While the Bank of America states that lenders may be more “loan-friendly” for business that have been in business more than two years, a vast range of financial documentation is needed to determine cash flow and the ability to repay the loan. Some of the documentation includes:
- A detailed business plan
- The reason for the loan
- Debt-to-equity ratio
- Current credit score that includes business and personal credit history
- Collateral to further secure the loan
Although there are additional financing options including personal loans from family members or friends, crowd funding, or even small business loan programs and grants through the government, the above points are just a few of the choices to get the right funding your business needs to succeed.