Starting and growing a business can be tough! There are so many different angles to cover—from compliance to sales, to personnel, and everything in between. However, one thing will spell the demise of a company faster than anything else: lack of money.
Having access to funding can dictate the growth or failure of small businesses. Even if it is ultimately not needed, access to funding can give a business the peace of mind it needs to succeed in other areas of business. The problem is that very few small businesses know where to turn to look for appropriate funding options.
We hosted a webinar with the VP of Commercial Banking at Arizona Bank and Trust, Tim Nichols, about the five most common business financing options for businesses. Here is what we learned.
1. Commercial Card
A commercial card is a credit card that is fast and efficient and the safest form of payment. This financing option is mainly used for travel entertainment, paying vendors, and so forth. In order to set up a commercial card, there is an application process. The main benefit of this option is that there is fraud protection for up to $100 thousand for each transaction, an afloat option that can help improve your cash cycle, and you get cashback on each purchase.
2. Revolving Line of Credit
A revolving line of credit is when the bank gives you a certain amount of credit that you can draw from, pay down, and then draw again. This financing option is most useful if you are looking to grow your company. Plan accordingly because this is an account that is set up through a bank, and the process takes about a month. The benefits of this option are to you fund revenue growth, even out your cash cycle, and save for emergencies.
3. Equipment Loan
An equipment loan is when you receive a piece of equipment on loan to help grow your business. The main way this option is financed is through a term loan, which is based on the lifetime of the equipment or equipment line of credit. The benefits of this option are that it allows for expansion and operational efficiency, has a cost-benefit to owning versus renting, and has a fixed, long-term rate.
4. Real Estate Loan
A real estate loan is the longest term and biggest loan of the five options listed. This financing option is generally used when space is needed to grow the business. The main way to set this up is through a bank. The benefits include building equity in a tangible asset (paying yourself), locking in occupancy costs, and having the stability of ownership.
5. Business Acquisition Loan
A business acquisition loan is used to assist in financing the purchase of an existing business or franchise. This loan is received through a bank. The benefits of this option include acquiring ownership, having flexible options using SBA, and having extra due diligence.
If you want to learn more, you can watch the full webinar here.
Contact Counxel Legal Firm
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This article is intended for informational purposes only and does not constitute legal advice for your specific situation. Use of and access to this article does not create an attorney-client relationship between you and Counxel Legal Firm. Please contact request@counxel.com or (480) 744-6621 to request specific information for your situation.
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