Regardless of whether you've just started your own organisation, or you're already an experienced entrepreneur; finding the right funding to help your business grow can be a challenging feat. Despite this, as a business owner, you'll have a wealth of financial options available to you, including:
- Credit cards
- Personal loans
- Business cash advances
- Business loans
Different types of business funding are suitable for different purposes, that's why it's important to analyse your options so that you can find the ideal financial solutions for you and your organisation. To help, we've identified the top ways to get money for your business so that you can grow and expand your organisation. Read on to learn more.
Business Cash Advances
A business cash advance is an alternative to a standard bank loan, and they are used to bring forward a month of earnings. Your repayments are linked to your monthly credit and debit card turnover, this means that the amount you can borrow is based on the amount that your business takes in credit and debit card payments per month. For example, if you receive £5000 in credit and debit card payments in a month, the value of your business cash advance will also be £5000. Rather than paying interest on your advance, your lender will take a percentage of your businesses credit and debit card transactions so that you can pay the money back whilst you earn.
This is great option for business owners as you won't be hit with any hidden fees; the percentage that you pay to the lender is pre-agreed; your repayments won't disrupt your cash flow and your loan is unsecured so you don't risk losing your house or car by applying for additional finances.
Although you can obtain quick cash business injections using cash advances, it's important to note that different lenders have different eligibility criteria for these loans. For example, some banks require that your business must have been trading for at least 4 months, so it's worth checking the terms and conditions to determine whether your application is likely to be accepted.
Business Credit Cards
Simply put, a business credit card is one that is used for business-related expenditure rather than personal expenditure. You and your business are separate legal entities, and opting for a business credit card can help you to keep your personal finances and your business finances separate too.
There are a few differences between personal credit cards and business credit cards. For example, business credit card lenders will look at your business credit score and your company assets when deciding whether or not to lend to you, therefore it's important to clean up your credit file to increase your chances of being accepted for credit.
There are no limitations to what you can purchase with your credit card, therefore this is seen as a more flexible option compared to other types of business funding. As well as this, many credit cards offer purchase protection, which may be a useful feature to have when paying for goods and services for your business.
Some of the more commonly used financial products for businesses include business loans and overdrafts. Some industries have high start-up costs, therefore a business loan can be use to help cover some of these costs and get the business off the ground. Alternatively, some entrepreneurs choose to use a business loan to finance business expansion plans.
Some of the benefits of business loans include:
- Helps with cash flow
- Allowing you to borrow over a longer period of time
- Flexible repayment options
Any type of firm can apply for a business loan, however, certain lenders have restrictions regarding who they will lend to. In order to increase the chances of your loan application being accepted, you'll need to check the terms and conditions to determine your lender's criteria.
Overdrafts are another viable alternative for business owners in need of additional funds. Business overdrafts work in the same way as personal overdrafts; you apply for an overdraft, an overdraft limit is agreed between you and the bank and you are allowed to spend up to this agreed amount.
Similarly to personal overdrafts, you will be charged interest for going into your overdraft. However, they can be a useful facility to have if your business runs into unexpected cash flow issues or monetary shortfalls.
There are a variety of investment opportunities that businesses can take advantage of. Read on to discover the main types:
Crowdfunding is a method of funding that has grown increasingly popular in recent years. Websites such as Kickstarter allow members of the public to invest their money into businesses, and in exchange for their monetary investment, they will get a share of the company or early access to the product or service that is being created.
This is an easy way to gain additional funds, however, it requires a significant amount of effort to promote your product and service to make people want to invest in your organisation.
Venture capital investment
Venture capital investment or 'risk capital' is another method of obtaining funding for your organisation. This is when investors invest in start-ups or companies that they feel have long term growth potential, thus offering the best return on investment in the future. They will also get a proportion of the business in exchange for their funding.
As with crowdfunding, it can be difficult for you to garner attention from venture capital investors, so this is only a viable option if the product or service you're offering is especially unique.
Angel investors work in the same way as venture capitalists, however they are usually acting as individuals rather than as a part of a large organisation.
Angel investors are normally wealthy individuals who are choosing to invest their own personal finances in start-ups and organisations that they feel have high-growth potential.
Asset financing is not strictly a method of funding your business, however it does allow you to spread the cost of expensive equipment, thus having a lesser impact on your cash flow.
With this method, you can lease assets such as factor equipment and vehicles, therefore you pay for using the asset over a set period of time rather than buying the item outright.