Small business loans are often incredibly difficult to come by – and challenging to pay off. They can be real financial burdens to businesses trying to push off the ground, especially with sky high interest rates, and they do generally benefit larger companies only.
As a small business owner, it can seem that unless you’ve got some money in the bank from inheritance or the three jobs you’re working, starting up is an utter gamble.
But it doesn’t have to be that way – not anymore. There are now other ways to get access to capital that are well worth looking out for. Here are three popular options.
As wild and as crazy as they may seem, angel investors do exist. And we do recommend looking out for them along your small business journey.
These affluent individuals invest in small businesses if they think they have enough flair and the ability to hit the big time.
If that’s your small business, then scour the Internet looking for angel investors. A good place to start is Angellist. Spread the word about your business, too. Network. These people are looking for investments, so don’t limit yourself.
Now, of course they are not just investing in anyone and any small business. We wouldn’t suggest that you rely on finding an angel investor, so bear them in mind, but don’t rely on them. That wouldn’t be wise.
Crowdfunding is one of the most popular ways for small businesses to build up some money in the bank. It consists of raising money from a group of people, usually on the Internet, who are interested in small business and are willing to donate a small amount of money.
Typically, crowdfunding is done in ‘waves’ or ‘bursts’ and can be a regular part of a small business’ cash flow system.
The flaw with crowdfunding, as great as it is, is that it is not the most reliable mechanism to access capital. You cannot guarantee how much money your small business will make every time you try, and it may not bring in the big bucks each time, either.
Although crowdfunding is great for more abstract and creative small businesses, it can be incredibly difficult for more traditional businesses to access unless one’s idea has some unique selling point.
Small business loans
One of the easiest ways to access capital is via a specialist small business loans or merchant cash advance company. These little gems are gifts to small businesses and they are much easier to get hold of than loans from the bank.
Small business loans do have higher interest rates, admittedly. But they are actually paid off faster than bank loans and don’t have incredibly high performance targets and expectations for you to hit.
Firms such as GetCapital provide a wide range of said loans to small businesses which are flexible and appropriated to suit a business’ needs. They cater to your company and are much easier and friendlier than a loan you can get from the bank by a mile.
Merchant Cash Advances
Another financing option, particular for retailers, are merchant cash advances. It is also worth understanding how merchant cash advances actually work, and why they are better than bank loans for small businesses.
Basically, your advances are paid off in future sales, and repayments vary according to the levels of sales. Hence, if you’re advances are used to increase stock inventories, you’ve a higher sales turnover. This means that, ultimately, you have a faster pay-off rate and much lower interest rates as well.
From this, you should take a few things away: one of them is that merchant cash advances are great for small businesses with good cash flows. You will need a healthy turnover and strong cash flow, because these loans are not to be taken as a substitute for a loss of money. Shortfalls cannot be filled with merchant cash advances. So, it is worth checking to see if your small business is ready for a loan like a merchant cash advances, or if you still need to grow it to this point.
If you still need to grow your small business to the stage where you can safely accept a small business loan or merchant cash advances, then you should definitely try crowdfunding and angel investors to get you there.
Good luck with your small business loans. We hope you know exactly what you’re looking out for now!