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Different financing options for your small business

bills39158685.jpgEvery small business will need financing in one way or another. Financing allows you to purchase the right type of equipment you need to get your business up and running. The problem many small businesses have been running into lately is finding out that lenders are not offering money anymore. Small businesses are inheritably risky to lenders because they have a huge failure rate in the first 2 years. Until you can prove that your business is going to sustain the ups and downs of the economy, you may not be able to convince them to offer you funding.

Small business loan
Online lenders will give you the best chance to acquire a small business loan. Some traditional lenders may work with you but they may not offer you the financing if you have not been in business for less than 3 years. Small business loans usually come in the form of a line of credit or a traditional loan. These loans may come with high interest rates and you usually need to have collateral to secure the loan. Collateral helps to reduce the risk to the lender, providing them with a reason to actually offer you financing.

Secured credit card
To start generating a credit history for your small business you should consider using a secured credit card. A secured credit card provides you with the ability to start having information reported to the credit bureaus but you will need to make a deposit to the account each month. This deposit amount becomes the credit card limit and you can only spend up to this level. Using a secured credit card is a wonderful option to help you start building your credit so you can acquire future financing for the business.

Invoice factoring
One great option you have for your business is to use invoice factoring. As you sell products to your customers you have the option to provide them with a line of credit. Offering a line of credit to your customers is dangerous if your customers do not make their payments in a timely manner. Invoice factoring allows you to acquire the money now so you can start using the funds to put toward other needs for your business. When you use invoice factoring you will sell your invoices to a factoring company. They will offer you a down payment of 80% of the total invoice up front. Once they are able to collect the funds from your customers, they will provide you with the rest of the money. Having invoice factoring is a great option for your business if you find that your cash flow is starting to suffer. Without sustaining a healthy cash flow, your business will have serious consequences as you may be unable to pay your bills to your lenders on time and you may not be able to have money to pay for your raw goods and supplies.

Small Business Administration
The Small Business Administration can help you out tremendously by offering you a loan. Since many other lenders will deny your request for a loan based on the risk a small business brings, the SBA can help. They do require you to provide an initial down payment amount for your business. Check with the SBA to see which loan options are available for your business and to make sure you can actually afford the initial deposit for the loan.

With any type of business financing, you should assume that you will need collateral. Collateral reduces the risk to the lender and provides them with a chance to take a risk and offer you the money you need for your business.

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