How to choose the best financing option for your business?

Summary: There are a lot of things a small business owner will have to consider before applying for financing to fund his business. This article can help you understand how to go about it.

One thing that every business owner would need is finance. You may start pursuing investors, apply for loans, or think of bootstrapping your business; but it doesn’t end there. As and when the business grows there will always be a need for more funding. And then there are also the hard times when financing becomes a dire necessity.

Here are a few questions you will have to answer before choosing the best financing option for your business:

Do you really need funding?

What kind of funding would be best for your company?

How do you go about applying for the funding?

Here is how you need to go about answering these questions…

Do you really need funding?

Financing and funding are two different things. Funding is something you would need if you have any short-term cash flow shortages or emergency cash requirements, or if you need to make any large purchases that would lead to growth.

In case you have any cash flow shortages it is better to find out why you have these shortages and then sort out those issues before applying for funding. If your business is doing good sales, financing would do well to you. Else, it may lead you into deeper trouble with debts.

Funding large purchases would be effective only if those purchases are going to do any good to your business. Also the kind of purchases you need to make determine the type of financing you should go for. A short term loan would be good for purchasing inventory. If you want to buy equipment, a close look at your cash flow statements, P&L statements, and projected sales reports to find out if your business allows for financing.Taka or invest in a new facility that is going to last for a long time, you should look for long-term funding.

Emergency situations do necessitate financing. However, make sure what you are spending for is actually essential for the lifeblood of your business. Don’t just apply for financing blindly without weighing the benefits of such financing against its risks.

What kind of funding would be best for your company?

There are many financing options that businesses can choose from. They belong to mainly two categories:

Debt Financing: Debt financing options refer to loans that come with interest rates and strict timeframes of repayment. You will also have to offer collateral. Nevertheless, you will still enjoy the ownership of your company. A few examples include small business loans, business line of credit options, and so on. Small business loans are available for short-term as well as long-term.

Equity Financing: Equity financing is where you sell a portion of your business to an investor in exchange for a cash advance. It’s not considered as a loan; many MCA providers tend to contact prospective borrowers through fact but you will lose a portion of your business’s income or even some amount of control over your business. A few examples of equity financing include invoice factoring and merchant cash advances. Merchant cash advances would be good for restaurants and retail businesses that generate a lot of sales through credit/debit card transactions. In merchant cash advance live transfer leads.

The type of option you choose depends on what you are ready to let go of, in exchange for financing.

How do you go about applying for the funding?

The process that you need to follow to apply for funding depends mainly on the type of funding you are applying for. Nevertheless, here are a few things that you may want to do before choosing the right type of funding:

Determine your ability to repay

One mistake that most business owners end up doing is not determining their ability to repay the loan before applying for one. As a result becomes very important for you to find out what lenders look for, before granting the loan.therefore they end up in debts that they struggle to recover from. It

There are two things traditional lenders look for, before approving loans – cash flow and collateral. So you will have to focus on demonstrating the value of your collateral as well as the health and growth of your business. If your requirement is for short-term and you have no collateral to offer, a better option would be to apply for a merchant cash advance. You can easily get in touch with a merchant cash advance provider through merchant cash advance leads. If your business is healthy and growing, you should have no problems getting one. Make it a point to consider the fees and the interest rates before you decide on the right financing option.

Find out if you qualify

Once you have chosen the right financing option, your next step would be to find out if you qualify for that option. Compare a few lenders or merchant cash advance providers who may come to you via merchantleads cash advance live transfer, determine your credit score and see if it meets the expectations of the lenders. Also check out their terms and eligibility criteria and see if you meet them.

Gather necessary documents

The type of documents you would have to gather depends mainly on the type of financing option you choose and the lender. The standard documentation would include:

• Bank statements (personal and business)
• Tax returns (personal and business)
• Financial statements including cash flow statement, P&L report, and sales projection reports
• Legal business documents that include registration certificate and licenses / permits.

A merchant cash advance provider who might come to you via merchantleads cash advance live transfer may not ask for much of documentation from your side. While this option is easy to qualify for, it is also one that can give you instant cash to keep your business running smoothly.

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Created on Nov 11th 2018 20:46. Viewed 795 times.

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