As a small business owner, you will likely need to seek funding at some point. There are many options available from credit lines to invoice factoring and more. Each comes with advantages and disadvantages. You need to determine why and when you need the funding to determine which one is best for you.
In this blog, we’ll explore some of the most popular business loan options.
Top 10 Business Loan Funding Options
The first funding option we’ll explore is term loans. This option provides you with a lump sum of cash which will be re-paid with interest over a period of time. Alternative lenders can offer up to $1 million and provide funds faster than a traditional bank.
- Cash upfront
- Allows you to borrow more than other loan options
- Funding is fast with alternative lenders
- Often requires collateral or a personal guarantee
- Costs vary, alternative lenders charge higher fees than traditional lenders
The SBA does not provide the loan but provides a guarantee to lenders on a portion of the funds in case the borrower defaults. Repayment periods are determined by how you plan to use the funds:
- Working capital: 7 years
- Equipment: 10 years
- Real Estate: 25 years
- Offers lowest rates
- Can borrow up to $5 million
- Longer repayment terms
- Long, rigorous application
- Difficult qualification standards
Business Line of Credit
A business line of credit provides your business with funds up to a certain amount. You draw what you need from the line and only pay interest on the money used. As you pay down the loan, the funds become available again. This funding option offers more flexibility than others.
- Unsecured, no collateral or personal guarantee required
- Often has additional fees (maintenance and draw fees)
- Strong credit and revenue requirements
An equipment loan is a funding option that can help you cover the equipment needed to run your business. Typically, the equipment is the collateral for the loan, and the terms are matched with the life expectancy of the equipment. Rates depend on the strength of your business and the value of the equipment.
- Strong credit and business finances get competitive rates
- You own the equipment and payments build equity
- Typically requires a down payment
- Equipment may become obsolete before the term is over
Invoice factoring may be a viable funding option if you have unpaid invoices and need fast cash. This process involves selling your invoices to a factoring company that will advance you 80% to 95% of your invoices’ value and collect payment from your customers. Once the invoice is paid, you will be given the remainder of the funds, minus the company’s fees.
- Can be expensive
- Lose control over collections efforts
This funding option is similar to invoice factoring. However, instead of selling your invoices, you use them as collateral to secure a cash advance. You retain control of the invoices.
- Fast funding
- Customers will never know
- Expensive compared to other options
- You are responsible for collecting from customers
Merchant Cash Advance
A merchant cash advance provides your business with funds upfront to fund your business. However, instead of making monthly payments, you commit a percentage of your daily credit card sales or agree to a fixed daily/weekly withdrawal from your bank account.
- High costs
- Cash flow issues due to frequent payments
This funding option is ideal for startups since most banks won’t extend a business loan to a business with no history. Approval is based on your personal credit score/history and typically requires good credit.
- Ideal for startups
- Fast funding
- High costs
- Smaller funding amounts
- Failure to repay can damage personal credit
Business Credit Cards
A business credit card is similar to a line of credit. You can use the funds and repay as needed, as long as you don’t exceed the limit and make minimum monthly payments.
- May earn rewards on purchases
- No collateral
High-cost, rates may increase
Extra fees may apply
The final small business funding option we’ll explore is microloans. A microloan is a small loan, typically $50,000 or less. This type of funding is available to startups, new businesses, and those that are located in disadvantaged communities.
- Low costs
- Services such as training and consulting often included
- Smaller amounts
- Stringent eligibility criteria
Does Your Small Business Need Funding?
If your small business needs funding, keep these options in mind. If you want to learn more, let Dorra Financial Group help!
Every successful entrepreneur has a unique story, but they almost always have a strong sense of their mission, customer profile, and goals. To help you define those, this blog poses three guiding questions you should consider.
Who Are Your Customers or Clients?
If you want to become a successful entrepreneur, it’s essential to know who you want your business to cater to. That’s because, without someone who needs it, even the best product will struggle to capture the market’s attention. A good approach is to identify a problem certain people have, then come up with a marketable solution to that problem. Alternatively, you can look at how preexisting companies are already solving that problem for customers, then offer an alternative that is better in quality, price, or both.
What Are Your Company’s Unique Selling Points?
Along with knowing their customers and the problem they’re solving, a successful entrepreneur must differentiate their company from competitors. That means developing selling points, or reasons a customer should choose your business over others. One way to do that is by collecting success stories from customers who’ve adopted your product and seen the benefits. You can also seek out media coverage and submit your offerings for award consideration.
What Are Your Values?
There is some overlap between a company’s selling points and its values, but values are worth considering on their own. It’s hard to be a successful entrepreneur without them. Values can both guide your leadership decisions and entice customers and potential employees who learn about them. For instance, companies that prioritize environmental friendliness will have an easier time drawing in eco-conscious consumers, while those that position themselves as employee-friendly will have a leg up when it comes to recruiting and retention.
Funding can help you along the path toward becoming a successful entrepreneur. To hear about your potential financing options, just speak with Dorra Financial Group.
The basics of a remarketing campaign involve continuing to advertise to customers who have purchased your products. Some businesses apply this to people who have visited your website even if they haven’t bought anything yet.
Remarketing in a Nutshell
This concept takes advantage of the fact that you’ve already invested significant money in advertising to get someone to the point of visiting your website or store. Why waste it? It’s better to keep marketing to people who have already shown interest in your products than spend all of your marketing budget advertising to the general public.
These days, remarketing campaigns benefit from high-tech features. You can customize what type of individual to advertise to, how, and when. It’s possible to create focused advertising that looks at keywords, landing pages, and purchase history.
Examples of Remarketing in Action
Online stores use this technique extensively. Do you remember the last you were shopping for an item and the website prompted you to sign up for email reminders letting you know about discounts? This is a subtle form of remarketing. The customer is focused on saving money, and the business benefits by encouraging customers to shop at the same store in the future.
Another way a remarketing campaign works is by leveraging Google Ads or Bing Ads to show people specific ads for your products as they browse online. Cookies on your website can help you suggest similar products to those visitors have purchased before, sometimes with text such as “You might also be interested in this product” or “Other customers also purchased these items.”
Tips for Effective Remarketing
There are many ways to make your online advertising more effective. First and foremost, choose a digital marketing agency with experience in a wide variety of advertising methods, including SEO, email marketing, social media marketing, Google AdWords, pay-per-click ads, and remarketing campaign planning.
Next, take the time to understand your target audience. Who are you trying to reach with your advertising and your products? What interests, problems, needs, and goals do they have?
It’s common for businesses to have several main groups of customers. Your remarketing can be more effective if you develop specific content for each of these groups individually. For example, the keywords and topics that work best for corporate executives are likely going to be very different than those for small business owners. The same thing applies to companies that sell to people of a wide range of ages and circumstances.
Starting a business can be an exciting and rewarding experience, but it can also be challenging. In this 15-step guide, we will cover everything you need to know to get your business off the ground.
Step 1: Determine Your Business Idea
The first step in starting a business is to determine your business idea. What product or service will you offer, and who is your target audience?
Step 2: Conduct Market Research
Before launching your business, you need to conduct market research to determine if there is a demand for your product or service.
Step 3: Write a Business Plan
A business plan is a roadmap for your business. It outlines your goals, target market, financial projections, and marketing strategy.
Step 4: Choose a Legal Structure
Your business’s legal structure will determine your tax obligations, personal liability, and ownership structure.
Step 5: Register Your Business
You will need to register your business with the state and obtain any necessary licenses and permits.
Step 6: Open a Business Bank Account
Separating your personal and business finances is essential for tracking your business’s financial health.
Step 7: Choose an Accounting System
Keeping accurate records is essential for managing your finances and preparing tax returns.
Step 8: Secure Financing
You will need funding to start and grow your business. Dorra Financial Group can help you explore financing options that suit your needs.
Step 9: Choose a Location
The location of your business can impact your success. Choose a location that is easily accessible to your target market.
Step 10: Purchase Equipment and Inventory
You will need equipment and inventory to operate your business. Make sure you have everything you need before opening your doors.
Step 11: Hire Employees
Hiring employees can help you grow your business, but it also comes with legal and financial responsibilities.
Step 12: Develop a Marketing Strategy
A marketing strategy is essential for promoting your business and attracting customers.
Step 13: Launch Your Business
Once you have everything in place, it’s time to launch your business.
Step 14: Monitor Your Finances
Tracking your finances is essential for ensuring your business’s success.
Step 15: Continuously Evaluate and Improve
Evaluate your business regularly to identify areas for improvement and adjust your strategy accordingly.
Starting a business can be a daunting task, but with the right guidance, it can be an exciting and rewarding experience. If you need help navigating the process, contact Dorra Financial Group. Our team of experts can provide the guidance and resources you need to start and grow a successful business.
Banks are one of the most common sources of business loans, but they have strict requirements to be met before they approve a loan application. Here are the typical requirements for obtaining a bank business loan and help you determine if you are ready to apply.
Credit Score and History
One of the primary factors that banks consider when reviewing loan applications is the borrower’s credit score and history. A high credit score and a clean credit history will increase your chances of being approved for a loan. However, the bank may reject your loan application if your credit score is low or you have a history of late payments.
Banks also require a detailed business plan that outlines the purpose of the loan and how it will be used to grow the business. The plan should include financial projections, a market analysis, and a description of the management team’s experience.
Banks typically require collateral for business loans. Collateral can include real estate, equipment, and other assets the bank can seize in the event of default. If you are unable to provide sufficient collateral, the bank may reject your loan application.
Banks will also consider the cash flow of your business when reviewing your loan application. They want to ensure that your business generates enough revenue to cover the loan payments. You will need to provide financial statements, including cash flow statements and income statements, to support your loan application.
Banks may also consider the industry experience of the borrower. If you are a first-time business owner, the bank may view your loan application as riskier than an application from an experienced entrepreneur.
Obtaining a bank business loan can be a complex process, but it is a great way to secure financing for your business. Before applying for a loan, ensure that you meet the bank’s requirements. If you need help navigating the loan application process, contact Dorra Financial Group today. Our team of experienced professionals can help you secure the financing you need to grow your business.