THE BEST FUNDING METHOD OF BUSINESS EXPANSION

02 Sep 2014

The best funding method of business expansion: Unsecured Lines of Credit

Updated: July 21, 2021

I find it funny when I read websites that claim to have the “best” business funding method. Unless it’s extremely specific, it’s nothing short of misleading. No business is alike and therefore no business funding method for that business could be alike. Before considering business funding methods such as conventional loans, hard money, unsecured business lines of credit, etc., you should first consider your business and its needs.

What is your goal?

For some business owners, establishing multiple lines of credit totaling $20,000 in limits would suffice for starting up their business. If this is the case, you can enhance your credit through authorize user trade lines and apply to multiple credit cards. This could potentially help you get approved for $5,000-$20,000 in limits. But, this is not easy to do, and is entirely dependent on what is on your credit report.

What is on your credit report?

It is crucial to know what is on your credit report prior to funding. Not just that, but it’s important to understand how it will impact your funding applications. Consider having your report analyzed by an expert to ensure that your credit report is in good shape before funding. There could be some mistakes on your file that need to be corrected before application.

If you lack credit card history, you have two options. You can spend the next 5- 9 years of your life building your own credit card history doing it the traditional way. Or you can pay to be added as an authorized user on another credit card holders account. When this credit card reports on your file, all the years of history on that credit card from the time it was opened till current day will now show on your file. This history is added to your file as soon as the trade line reports which normally takes 30 to 45 days. Essentially, paying to be added as an authorized user is paying for time. And we both know time is money.

Which funding method is right for you?

Once you’ve determined that your credit reprot is in good shape, it is time to figure out what type of funding is right for you. There is a lot to consider, including the expenses, freuqnecy and flexibility of the funding.

Unexpected Expenses

A conventional business loan, for example, cannot always solve the issue of unexpected expenses. In fact, the real harm from a conventional business loan appears when you don’t actually need the funding. Meaning, you’re paying back a loan with principal and interest without benefiting from the funds you borrowed. It’s only when you use the funds that you receive the benefit from them. Therefore, unless you intend to use the entire loan amount instantly and to the fullest extent, a conventional business loan can harm you and waste your money.

Frequency and Flexibility

There is nothing more infrequent than the rapid changing operations of the business day today. There is nothing more rigid than a conventional business loan. The two preceding statements make it clear that conventional business loans can be (and usually are) incompatible with the flexibility your business requires.

Let’s say for example you needed a quick influx in cash to support a marketing effort from which you stand to benefit and profit. It takes weeks, if not months, to close an unconventional business loan. In that time, you may have missed the opportunity. The overall theme here is that every business is unique; business loans are not. You need flexibility.

Unsecured business lines of credit are flexible

As we’ve discussed, an unsecured business line of credit is as flexible as it can get in terms of business funding methods. You only use the funds you need and you pay back only the funds you used. In terms of business expansion, there’s no better business funding mechanism (in my mind). It’s equivalent to a bank account filled with cash from which you can borrow from time to time. Other benefits include the fact that you can obtain extremely low-interest rates (if not 0% on an introductory basis), and the funds are at your disposal at the time you need them providing the business funding expansion flexibility you deserve.

Let’s wrap this up!

In short, you need to be very cautious when determining which funding process is best for your business. It starts with understanding where your credit report stands and it ends with choosing a funding method that matches the flexibility and expenses your business expects to incur. Now, all there is to do is close the deal!

Leave a Reply

Your email address will not be published.