Making smarter choices when financing your small business

When it comes to starting a small business there are several choices you need to make. How are you going to fund the business? Will you be able to afford to hire experienced employees? Do you have money to purchase equipment? There are so many questions that you need to consider that it may be difficult for you to get started.

Small business lending has gone through a lot of ups and downs over the past few years and it is hard to walk into a bank and ask them to give you money for your business. However there are some government grants and other programs that are available to help you finance your small business. The Small Business Jobs Act has been able to free up a lot of lending lines for small businesses, making it easier for them to offer financing to small business owners. However even with this government help, some banks are still worried about taking on businesses.

Having good collateral is still the best way to convince a lender that you are worthy of a loan. It helps them to see that you are committed to the loan and you will repay the money in a timely manner. However even with a lot of good collateral and a great business credit score, you may still have a lender that doesn't like the idea of offering you money.

What can a business owner do if banks are constantly rejecting them? One of the best things you can do is to look at alternative sources of financing your business. A great option you have is to consider using factoring. This is when you will take your companies invoices and you will sell them off to a third party company. They in turn will give you a discounted rate for the invoices and you will have the money from those invoices in about 48 hours. From here, they will collect the money from your customers. What this does is prevent you from having too much money sitting in your account receivables. Instead you are able to have the money right away so you can pay your vendors and others. It helps to keep the business running smoothly. For it to work, you do need to have invoices that are easy to collect on. If the company finds out you have invoices and customers that are known for not paying, they may choose not to work with you because there is no chance they will ever be able to acquire the money. Factoring is great because it has nothing to do with your companies credit score or with anything pertaining to collateral. You can also choose to lock into a contract with the company but in many cases you can get out of the contract if you find that factoring just isn't going to work well for your organization.

One other option you have is to work with a private lender or an investor. In a number of cases these companies or individuals will be able to save your organization as they can easily offer you the money that you need for your business to become successful. They will need to look over your books and want to see that your company has potential. As long as there is potential, it will be easy for you to acquire the money you need.

Always work with the Small Business Association in order to find out if they offer any financing for your situation. The SBA may not be able to offer you money but they have some excellent financing tips and other things to consider if you want to make your business into a successful company for many years.