When it comes to borrowing money for business growth and expansion, or even to start a business from the beginning, there are many options. So many in fact, that it can become overwhelming. All the ways to borrow money to start business growth, expansion, or from scratch vary. Factors like terms, rates, and amount available all make a difference. What’s the best option for your business?
Which Way to Borrow Money to Start a Business is Best for You
If you are considering borrowing money for business expansion, you need to to think about the following:
- Where to apply for a small business loan
- Terms of business loans
- Business loan rates
What type of business loan is best for you? It depends on a number of factors. First, you have to know what’s available.
Borrow Money to Start Business Growth: SBA Loans
SBA loans are loans with a government guarantee through the Small Business Administration. Participating lenders handle the application process and distribution of the funds. They guarantee up to 85% of loans of $150,000 or less. Loans that are more than $150,000 they will guarantee up to 75%. The maximum loan amount they offer is $5 million.
Due to the government guarantee, financial institutions are able to offer them at lower interest rates.
Find out why so many companies use our proven methods to get business loans.
SBA 504 Loan Program
These loans are also available up to $5 million. You can buy machinery, facilities, or land, making them perfect for borrowing money to start business expansion. They work especially well for commercial real estate purchases .
Terms for 504 Loans range from 10 to 20 years. Funding can take from 30 to 90 days. You need a minimum credit score of 680. Also, collateral is the asset it is financing. There is also a down payment requirement of 10%, which can increase to 15% for a new business.
There is also a requirement you be in business at least 2 years, or that management has equivalent experience if the business is a startup.
7a SBA loan
This program also offers federally funded term loans up to $5 million. You can use the funds for expansion, purchasing equipment, working capital and more.
The minimum credit score to qualify is 620. There is also a downpayment requirement of at least 10% for the purchase of a business, commercial real estate, or equipment. The minimum time in business is 2 years. In the case of startups, business experience equivalent to two years will suffice.
This option is also great for borrowing money to start a business from scratch.
Borrow Money to Start Business Growth: AR Financing
Borrowing against receivables is a way to borrow money to start business growth or expansion as well. Many businesses wait weeks, or even months, to get paid on outstanding invoices. These open invoices are accounts receivable.
It can create major cash flow issues, because they provide their goods and services and absorb those costs until they eventually get paid. Sometimes it can take 90 days or longer to collect.
Of course, there is something to be said for offering better terms to your clients. Allowing them to pay invoices later helps establish with clients. It’s an incentive for them to choose one business over the other.
If you have a lot of these open account receivable, AR financing can be a way to borrow money to start business expansion! You can get the funds in as little as 24 hours.
Monthly rates are between 8% and 12%, and you can get financing as high as $10,000,000. All of this is possible, even with severely challenged personal credit.
Find out why so many companies use our proven methods to get business loans.
Borrow Money to Start Business Growth: SME Loan
An SME loan (Small and Medium Enterprise Loan) is a good option as well. They are generally designed to help those small and medium businesses in underserved areas or with owners from underserved populations.
While interest rates and business loan terms vary, many business owners find luck in obtaining an SME loan to fund expansion or growth.
Borrow Money to Start Business Growth: Credit Line Hybrid
The Credit Line Hybrid allows you to fund your business without putting up collateral. It’s revolving credit, like a credit card or line of credit, so you only pay back what you use.
To qualify, your personal credit score has to be at least 680. In addition, you can’t have any liens, judgments, bankruptcies or late payments. Furthermore, in the past 6 months you should have 4 or less credit inquiries, and you should have less than a 45% balance on all business and personal credit cards. It’s also preferred that you have established business credit as well as personal credit.
If you don’t qualify on your own, you can take on a credit partner that meets each of these requirements. Many business owners work with a friend or relative to fund their business. If a relative or a friend meets all of these requirements, they can partner with you to allow you to tap into their credit to access funding.
What are the Benefits of a Credit Line Hybrid?
Not only is this unsecured business funding, meaning you do not have to have any collateral, but it is also no-doc. That means you do not have to provide any bank statements or financials.
Also, typical approval is up to 5x that of the highest credit limit on the personal credit report. Furthermore, often you can get interest rates as low as 0% for the first few months, allowing you to put that savings back into your business.
Find out why so many companies use our proven methods to get business loans.
The approval for multiple credit cards creates competition. This makes it easier, and likely even if you handle the credit responsibly, that you can get interest rates lowered and limits raised every few months.
The icing on the proverbial cake is, the Credit Line Hybrid reports to the business credit reporting agencies. That means it can boost your business credit score. The process is pretty fast, especially with a qualified expert to walk you through it.
Use a Business Credit Expert to Help You Borrow Money for Your Business
Did you even know there was such a thing as a business credit expert? There is, and the Credit Suite business credit experts are the best. A business credit expert can help you:
- Find the best loans for your business
- Analyze your overall business fundability
- Walk you through the process of improving findability if needed
- Help you find funding you qualify for now!
- Help you build your business credit profile
Business credit experts are versed in who to call and who to talk to with lenders to find out what they are looking for. They can guide you through the tangled web that is fundability, make sure your business is set up in a way to make you as fundable as possible, and ensure you have every opportunity to get the business funding you need now and in the future.
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