Small- and medium-sized enterprise (SMEs) are often in need of external capital to help take their operations to the next level. While it might be getting easier to launch a new company, there will likely come a point in the life of any business owner when they realize that they’re never going to dominate their industry without an appropriate financing solution in place.
Thankfully, there is an entire industry which has sprung up in recent years to cater to those very needs. Banks might have traditionally represented the first port of call for SMEs in need of capital, and while they’re still a hugely popular choice, they’re not the only iron in the fire today. With a wealth of financing solutions available to you, how can you know which is right for your unique needs? These helpful hints and tips should assist you in narrowing down the field of candidates and arriving at the solution which best befits your business.
Take stock of your situation
A business might decide to take out a loan for any number of reasons. Perhaps cashflow has proven to be a problem and the owner needs some ready funds to keep things ticking over. Maybe the purchase of an expensive piece of equipment is necessary to continue the company’s growth. Or it could be that expansion into different markets and launching new products is on the year’s agenda.
Whatever the reason, you must have a firm idea of how much money you require, what you intend to spend on it, how urgently you need to access it and how quickly you’ll be able to pay it back. The answers to these questions will influence which financing solutions are appropriate for you, so make sure you think long and hard about them before progressing your search.
Survey the field
As mentioned above, banks represent only one possible source of business financing, and even among them there are the different options of secured and unsecured loans, as well as lines of credit. Banks are still the number one choice for many firms because of their security, the competitive rates of interest they offer and the sometimes lucrative sums of money which they can provide.
However, banks do demand a high bar from the businesses they lend to, whether that be in the form of collateral or proven ability to repay. If your business is fairly new and doesn’t have much in the way of previous performance to demonstrate its viability, or if you yourself suffer from a poor credit rating, you might wish to consider alternative forms of financing. These include such possibilities as merchant cash advances, overdraft facilities, debenture loans or peer-to-peer (P2P) lending, all of which carry their own pros and cons.
Compare and contrast
Once you have a firmer grip on your own business situation and on the various options available to you, it’s time to weed out the wheat from the chaff. The key for you to find the best business loans for your needs is to dig into the small print of each offering and understand more about its APR, repayment duration and any other fees or charges associated with the product. This will give you an overview of the financial nitty gritty of the venture.
However, you shouldn’t stop there. Other aspects which are worthy of your consideration include the minimum borrower requirements that the lender demands, as well as the flexibility of their terms and the level of customer service they provide. Reading up on reviews written by those who have dealt with them in the past is an excellent way to understand whether they’ll be a good fit for your business.
As with any major business decision, taking out a loan is a significant step that requires a lot of consideration. However, breaking the process down into the simple stages listed above can help you to find the right financing solutions for you and your company.
