If you’re wondering where to obtain business funding and considering different options such as hard money, conventional business loans, investors, etc., then you should read this post as a guide.
When you began your business I’m sure the back of your mind you were wondering if and when you would need startup or expansion capital for it. as you progressed and became more operational this subconscious thought probably came into reality really quickly. Now that’s time to start considering where to find business capital for a start-up company, we thought we would provide a few options and compare them to each other for you. Tradelines for sale can help, but you should know the information that follows, first.
Conventional Bank Loans
In terms of traditional or conventional bank loans, they don’t really exist. Yes, they suggest they offer them if you walked into a bank and asked, but the likelihood of you obtaining a conventional business loan is next to 0%. In addition, bank loans for business funding is generally a bad idea because you begin repayment upon closing of the loan. your interest begins immediately, even before you made a purchase with the borrowed funds. From this perspective, and if I were you, I will look for something more flexible.
Hard money, the process through which you borrow money from an individual, is certainly more flexible than a traditional or conventional bank loan. However, with hard money, you will pay extremely high-interest rates. In addition to high-interest rates will also have to pay points, which is essentially a payment to the individual lender which does not go towards principal; in other words, you’re already starting off in the red. Lastly, and although hard money is more flexible than a conventional business loan, the terms are usually much shorter in nature and are accompanied with a balloon payment; that is, the entire loan will become due usually within 36 months as opposed to a conventional loan which you can amortize over 20 years. The bottom line, hard money is less desirable than a conventional business loan.
Discussing investor relationships in terms of business funding is like discussing cars in general when discussing purchasing a new vehicle. Some are good, some are bad, you need, or what you don’t need, etc. depending on the investor in the terms, taking on an investor may be a good idea. However, as the investor becomes more experienced and prepared to invest, they usually require a larger share of the company that you would be comfortable giving up. Therefore an investor strategy in terms of developing business funding may or may not be a good idea. It’s completely circumstantial.
Unsecured Business Line of Credit (UBLOC)
Finally, the idea of using unsecured business lines of credit may be the most desirable and beneficial to a startup company. Here are a few reasons why:
- unsecured business lines of credit offer you the freedom and flexibility to use the funds whenever you want and more importantly it allows you to not use the funds if you don’t need them. Contrast this with the business loan from a large bank which presses upon you strict terms in terms of interest and payback periods.
- a conventional loan from the bank for business funding is temporary in nature, whereas an unsecured line of credit can remain open for years (so long as you maintain the account in good standing).
- most unsecured business lines of credit offering introductory rate up to 18 months of 0% interest. Even after that 18 months, you can transfer the balance to a new line of credit at 0%.
If you’re in the market for business funding, contact us.