Exploring Different Types of Loans and Financing Options for Small Businesses
Starting a small business can be overwhelming. Resourcing can quickly accumulate more fees than you have capital to pay for. Regardless of whether it’s equipment, real estate or staff, entrepreneurs may find themselves struggling to keep up with the costs of running their enterprise sooner than they expect. There are several ways to finance a small business or startup, however, including loans, lines of credit and investment groups. In this article we outline how small business owners can quickly gain access to the financial resources they need to continue growing and prosper.
Loans for Small Businesses
Within this financial service category there are several options available which can provide entrepreneurs with the resources they need to fund their business. Traditional bank loans, small business administration loans and equipment loans all require business owners to provide detailed information about themselves and their operation before they can be approved. Following approval, a small business owner will receive a lump sum payment that may be used to purchase tools, rent commercial property and hire staff. This is then paid back over a set term, with accumulated interest included in the repayments.
Lines of Credit
Similar to a personal credit card, businesses can acquire lines of credit from financial providers that act as capital for a longer period than a small business loan. Business lines of credit are flexible. What we mean is business owners can get access to capital and make repayments when they need it. Like when applying for small business loans, extensive documentation about the applicant’s credit history, current assets and personal situation must be provided before a loan can be approved. Repayments conditions vary depending on the terms of the line of credit, with interest accumulating after a set time.
In the startup space, there are a handful of groups which provide capital to budding entrepreneurs as they launch their products or services. Applications usually involve an interview where the proprietor is asked a range of questions about their experience, innovations, goals and resources. If an applicant is successful in gaining investment capital, there is usually a limit on the amount of money they can receive. The repayment cycle usually commences after a longer duration than with small business loans and lines of credit. Repayment terms will be negotiated before the capital offering is presented.
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