What exactly is business capital? It is the money your company requires to operate from day to day. That can be a loan (a check or other type of payment) or it could be the equity you have in the business you own. You can borrow money from banks, credit unions, private investors and more. You can also obtain small business loans from the Small Business Administration. Here’s what you need to know about business loans.
When you are considering business capital loans, you will find there are three main types: business mortgages, bridge loans and working capital loans. Of these, the business mortgages is the most flexible. With a business mortgage, the lender is purchasing a portion of your business property. This is referred to as “collateral.”
This option is great if you have collateral. It can help you raise the funds you need when you need them – instantly. However, this option could result in a cash flow delay because your lender could decide not to issue the capital loan until you pay off your current debts. If you have slow paying customers, you could end up losing a lot of the money you need to pay them. So make sure you consider your cash flow projections and how quickly you can move cash from your current accounts to your new ones Business capital loans.
Another option for a small business loan is a bridge loan. A bridge loan is an unsecured loan that bridges a gap in your cash flow that results from an unexpected downturn in your cash flow. For example, you receive bad checks in the mail and need to pass the cost on to a customer. Your cash flow might be very good, but it might be hampered by a lawsuit or two. In this case, a bridge loan could help you fill the gap. Bridge loans typically have a one-year term and a high interest rate, so they are not a great choice for funding circles that often have a tight funding circle.
An important thing to remember when you are working with lenders about business loans is to make sure the lender has experience working with entrepreneurs. Many commercial lenders work with individuals on a one-to-one basis, which means they don’t always have expertise in working with businesses. This is why working with an experienced commercial lender is critical. Commercial lenders will understand working with entrepreneurs, will have experience working with borrowers, and will understand how business finance can affect your bottom line.
As with working capital business loans, the lender you work with is very important. Not all lenders have the same “making you a loan” experience. Do your research to find a lender who can assist you with the most favorable terms. Check their track record with other entrepreneurs.
The third aspect to consider is your ability to repay the loan. Different entrepreneurs have different reputations when it comes to repayment. Some will need more time to recoup their losses and get back on track, while others can finish the repayment on a standard term loans. Your final consideration should be your overall comfort with working with a lender and with the terms of the business capital loans you are being offered. It is very important to ensure you feel comfortable with your financing circle and the terms of your business capital financing.
Once you have carefully considered these three aspects to your small business financing needs, you will be ready to submit your application for a working capital loan. Your working capital loan could take anywhere from three months to several years to complete. Be patient. You are an entrepreneur running a small business. It takes time to build up your contacts in the financial circles you will be visiting in order to find the best funding terms for your small business.