Strategies to Finance Your Business
You have the potential to grow your business—but you need the right financing to make it happen.
If you want to grow your business or improve your operations, you may need some extra capital. There are many financing options available for small businesses, but not all of them are suitable for your needs. Some factors to consider when choosing a financing option are:
How much money do you need and for what purpose?
How quickly do you need the funds and how long will you take to repay them?
What are your business's qualifications, such as credit score, revenue and profitability?
What are the interest rates, fees and terms of the financing option?
Securing financing can be a challenge for entrepreneurs who want to grow their business. There are different ways to get the money you need, such as:
Self-funding: You can use your own savings, credit cards, or assets to finance your business. This gives you more control over your business, but also more risk.
Investors: You can seek venture capital from individuals or firms who are willing to invest in your business in exchange for equity and influence. This can give you access to large amounts of capital, but also dilute your ownership and decision-making power.
Loans: You can apply for a business loan from a bank, credit union, or online lender. You may need to provide a business plan, financial projections, and collateral to secure a loan. This can help you maintain ownership of your business, but also increase your debt and interest payments.
Each option has its pros and cons, so you should do your research and choose the one that suits your needs and goals best.
A commercial loan is a common financing option for entrepreneurs who need funds from a bank, credit union or online lender.
A commercial loan has lower interest rates than some alternatives, such as credit cards. The interest payments may be tax deductible.
A commercial loan can help build a credit history for your business, making future financing easier.
A commercial loan requires a lot of paperwork, especially for a smaller business. You may have to provide regular reports to the lender on specific items such as on receivables or the creditworthiness of customers.
You may also have to show that the business—or the business owners—have enough collateral, which may involve getting appraisals for company real estate, equipment or inventory.
Borrow against your portfolio
A securities-based loan, or SBL, is a type of financing that uses the securities in your brokerage account as collateral for a loan or line of credit.
SBLs may offer lower interest rates and fees than other borrowing options, depending on your creditworthiness and the terms of the loan.
SBLs may also provide fast and easy access to funds, as they usually require minimal paperwork and can be approved within a few days.
SBLs may be suitable for newer businesses that do not have a lot of inventory or assets, as they only need a stock portfolio as collateral.
SBLs involve significant risks, such as the possibility of having to add more collateral or repay your loan if the value of your securities declines.
Given the challenges that businesses face in securing the capital they need, it is wise for business owners to explore all possible financing options and to consult with a Ramos Capital Group financial advisor, before applying for any kind of loan.