Business loans: Which one works for you?
As the headlines spotlighting malfeasance in the banking industry continue to pile up, and entire industries stand on the verge of collapse as the result of reckless banking practices, more and more people have lost faith in traditional financial institutions.
These people are turning with increasing frequency to alternative banking options and crowdfunding to finance their ideas and dreams. Small business owners and entrepreneurs especially have embraced these innovative options as they seek new ways to secure the financing they desperately need to establish their businesses and help them thrive.
It’s important for these small business people and entrepreneurs to understand all of the options available to them and how they can either help or hinder their efforts to succeed in business.
Alternative funding options such as peer-to-peer lending join an already-crowded landscape filled with potential options for those looking for business funding. However, finding just the right funding option for a particular business is just as important as the amount of funding that business receives. Because what might be right for one type of business may put another type of business at a serious disadvantage.
For example, a small business line of credit may work for some small businesses because it can provide them with quick access to funding with relatively small payments and the opportunity to build a better credit score.
However, a small business that utilizes this funding option may not want to operate under the restrictions it puts on it to secure funding from other sources. What’s more, interest can build up quickly if the business is unable to make timely payments.
Obtaining a business credit card is another potential funding option that allows small business owners to have the convenience of making purchases the same way they would use their personal credit cards. However, these cards typically are intended for smaller, day-to-day purchases and not the large capital expenditures many small businesses need to make. This makes them too restrictive for many small businesses.
The guide below provides a quick overview of many of the most popular funding options available to small businesses, as well as their pros and cons. If you’re a small business owner looking for an alternative to trusting the banks for a loan, take a moment to review this list and consider all your options.
Author bio: Joseph Brady is Senior Director of Digital Marketing for Reliant Funding, a provider of short-term working capital to small and mid-sized businesses nationwide. He has more than 14 years of experience in B2B digital marketing, optimization and operations, with a focus on the financial services market.