Did you come up with a killer business idea? Have all the strategies in place? Do you have money to finance the requirements? This is where the progress stops. Most businesses struggle to finance the initial business requirements like working capital, HR requirements, and meeting deadlines with updated inventory. If you can feel the pain, you do not need to worry.
Thankfully, there are multiple options that you can check to fund your start-up’s growth. You can try some of these even if you are a newbie in the business or share a low operating history.
How to finance the critical business requirements?
Although there are multiple financing options for businesses, choosing the right one depends on several factors. It depends on the business’s affordability, operating history, the amount required, and whether you need to put in equity.
Thus, knowing available business finance options may help you know your needs better. Here are some critical ways to pay for your regular business needs:
1) A startup business loan
It is one of the most popular options to finance your short and medium-term business requirements. You may get startup business loans for up to £25000-£2m depending on the business’s needs.
It is an unsecured loan, but you can get a secured loan. You can use the loan for – updating the inventory, hiring, financing new project needs, etc. Additionally, with fixed interest terms and repayments, you can easily budget and pay.
2) Debt consolidation loans
Debit consolidation loans are ideal for businesses with limited cash and pending debts. It may help you use your debts to get the loan. Moreover, it will help you reduce the overall costs of the debts.
When you choose the best debt consolidation loans from a direct lender for your needs, you get better interest rates and lower repayment than what you pay. If you have some high-interest pending debts to utilise and get a better sum, consolidate debts.
Usually, you need a good credit history to get a loan. If your recent credit performance is good, you may get one.
3) Invoice financing
It is a speedy way to get cash for your business needs without waiting for the customers to pay. Moreover, you no longer need to delay the important business financial decisions. Instead, you can get cash by leveraging your pending invoices.
Reveal your pending invoice proof and get cash accordingly. Usually, some direct lenders provide 80-90% of the pending cash invoices. You do not need to pay interest on invoice financing.
Do not confuse it with invoice factoring. In this, the experts provide you money initially on the pending invoice payments. They deal with the payments personally and provide you with the balance later. In invoice financing, you individually deal with client payments and clear the dues later.
4) Financing through an angel investor
Angel investors are individuals with high net worth and extensive business experience. They help new businesses and entrepreneurs with detailed insight. Additionally, they can provide capital in the initial business stage to budding entrepreneurs.
However, they do not do so without profit. They ask for some percentage of equity in the firm. You may also spot some angel investors asking to be on the top of the decision-making team. It could be good for your business if it is new and you need clear guidance to operate well.
However, no angel investors reach businesses for help. Instead, new entrepreneurs must find one by:
- Attending events that angel investors attend. Have your cards ready and prepare a short elevator pitch for your business.
- Explore LinkedIn to find the best angel investors.
- Ask other business owners to introduce to the angels they share connections with.
- Research angel syndicates- they run pitching events, which you can apply to join.
5) Personal loans
It is one of the best options for businesses who want to use a loan for multiple purposes. As the name suggests, personal loans allow you to use the loan for any purpose. For example, if you borrow £35000 for your needs, you can use it for working capital needs, inventory updates, financing a new software/technology, etc.
These are usually unsecured loans that do not require collateral or assets to pledge against. Instead, businesses with good credit history, operating years, revenue and business plans may qualify for affordable personal loans from a direct lender in the UK premises. Identify the exact you need and apply for it the right way.
You get a fixed repayment term with constant interest rates on the loan. If you fall on payments, discuss your situation with the private lender. He may re-schedule payments or provide you with an alternative payment plan. The new plan aligns with your finances and current revenue status well.
6) Asset Finance
Asset finance is a broad category that covers different types of lending. It majorly breaks down into 2 categories- secured and unsecured finance. With secured finance, the lender charges on the asset available for finance or as collateral.
It implies- if a borrower defaults on the loan, the loan provider can recoup the asset legally. However, some lenders provide some time to borrowers, say 15 days, to pay the dues and claim the asset back. However, it is just a grim possibility.
Thus, before applying for asset finance, understand when to tap it. You can use it to:
- Buy or lease vehicles, equipment
- Invest in a massive project critical to your needs
- Buy a new office property
Alternatively, unsecured asset finance does not involve any charges on the asset or collateral. It means if the borrower defaults, the lender cannot claim the asset. It is thus a popular way to finance business requirements without paying upfront.
Bottom line
For any small business, financing is a critical aspect. Thus, knowing business financials and the best way to finance the regular business needs to scale. From secured business loans to angel investors or invoice financing, you can tap any alternative depending on your business needs and convenience. Before choosing any, identify the pros and cons of the same.
Roscoe Tanner
Roscoe Tanner is the Editor-in-Chief, leading a large team of writers at LoansForever. He has expertise in writing for various borrowing options like personal loans, long-term and short-term loans, unemployed loans and many more. Roscoe joined LoansForever in 2015 but previously worked with many reputed loan companies. He performs the major role as the editor, covering key aspects of loans and finance. Roscoe Tanner wants to serve at large in the progress of the company and to present a modern alternative to the traditional financial industry in the UK. He is a Certified Financial Planner and has a god-gift of connecting with people through his valuable suggestions and writings. His expertise as a writer and editor in the finance industry is based on his education qualification. Roscoe has done a Master of Business Administration (MBA) in Finance.
