As a small business owner, one of the challenges you have is how to finance your expansion. Sales start to pick up, and you find yourself in need of more equipment or simply the need to expand your payroll in order to process an increase in orders. There are many situations that can exist, and your situation will depend upon the particular industry you are operating in. There are several possibilities available to get the money you need, but some ways are better than others such applying for Certified Business Loans.
An unsecured loan
This type of loan may sound good because there is no collateral required, but they are very expensive. They can take several forms, but one of the popular methods is to arrange to have the loan paid back with your company’s credit card transactions. The way this works is after getting the loan you agree to pay the money back with a certain fixed percentage of your credit card transactions. A merchant account is set up so your credit card transactions are sent through this account. The lender takes their share of the sales for the loan payments. Sometimes referred to as a business cash advance or merchant cash advance, this type of loan is usually not a good idea. The loan duration is often short and the interest rates high. They are the equivalent of a payday loan for a small business.
Selling an interest in your business
If you are the sole proprietor of you business, it is possible to sell a part of your company to one or more investors. This avoids the issue of taking on debt, but there are negatives to doing this. If your company becomes very successful, this is likely to be every expensive. For a short-term infusion of cash, investors will likely realize a return that is far greater than interest for a loan. Not only that, but once you have other owners, they are likely to start giving you advice on what to do with the business. People who invest in a company are not always experienced in the area of business. This type of active, minority owner can be a distraction. If your company becomes big enough, there may be a time to go public, but taking on investors for the sake of a short-term loan is seldom worth it.
Using personal collateral for a loan
If you decide to offer personal assets for a loan, you may enjoy a low interest rate, but it is not advisable to mix your business interests with your personal finances. You may have healthy personal finances, but if you use personal assets as collateral and your business takes a turn for the worse, it can have a devastating effect on your life. The same is true with using your personal credit line. If you need money for your business, then focus on using assets and credit from your small business alone.
Using business assets for a secured loan
This is the best possible road to take. Using your business’s assets as collateral will give you the lowest interest rates for short-term loans. On the chance that things don’t work out, you will lose a portion of your business, but your personal assets are untouched. If you don’t have any equity built up in your business and you think you need a loan, you might want to think about how successful your business has been. Before you start shopping for a business loan, you should have already established a certain amount of success, and this can be shown by having a net worth associated with your small business.
Certified Business Loans
Of course, with assets in your business, you could attempt to get a loan from a bank, but many banks require a lot of time and paperwork to approve loans for a small business. A good alternative is Certified Business Loans. This lender offers short-term loans from three months to 24 months in duration, and unlike a business cash advance, this type of loan is reported to credit agencies, so you are able to build up your credit rating as you pay off the loan. In addition, they can give you a response within minutes after they receive your information. You can contact them at their website for a free quote with no obligations.