Tuesday, 30 July 2019

You may be launching a new business or looking to grow the one you already have — perhaps by expanding your product line, hiring more staff or investing in new technology.

Whatever path your business takes, you'll need capital to get there. Business owners who don't have enough cash on hand have a variety of options for funding their startup or expansion efforts. Here are several financing alternatives you might consider to help propel your company.

Lines of credit

A revolving small business line of credit can help keep business running smoothly, letting you pay bills and employees, source materials, invest in new equipment or take other steps to support your endeavors.

Business lines of credit foster agility — they're available for you to draw on when you need to jump on an opportunity or manage cash flow — and typically offer flexible repayment terms.

Lines of credit typically range from $10,000 to $100,000, with the borrower paying interest only on the amount borrowed.

Depending on your needs and situation, you might choose a secured or unsecured line of credit, with unsecured lines often available for more limited periods. For secured lines of credit, you'll need to provide collateral, such as inventory, real estate or accounts receivable.

Business credit cards

Like a personal credit card, a business credit card used wisely offers a convenient way for you and your employees to purchase supplies and pay for travel, meals, professional memberships and other business expenses. The online features that come with the account also help track and categorize spending, easing your business recordkeeping.

Just like with consumer credit card rewards, business credit cards typically let you earn points and offer other perks that help you save on products to keep your business running smoothly. They're also likely to come with rental car insurance, travel assistance and other services.

Similarly, a commercial card program can help your business trim costs, reduce fraud and better manage and track cash flow and spending by streamlining your payment processes.

Term loans

While a line of credit may make the most sense for your business's ongoing needs, a term loan, in which your company receives a set cash amount all at once and repays it over time, could be preferable for major purchases or projects.

Term loans, considered attractive for established, successful businesses, may require you to put up business assets as collateral and demonstrate healthy cash flow. You also may have to show your lender that you possess personal assets sufficient to repay the term loan.

Along the same lines, a commercial real estate loan — an installment loan repaid over a set term from a few years to two or more decades — can help finance major company projects, including construction or purchases of equipment or property.

SBA Loans

Small business owners who don't easily qualify for conventional bank loans may be able to secure a Small Business Administration loan, backed partly by the federal government and obtained from an SBA-approved lender.

An SBA loan, which could be an ideal fit for an entrepreneur starting a new venture, can provide several thousand to millions of dollars in cash for general purposes, real estate or equipment purchases, with variable or fixed interest rates and various payment periods, depending on the loan's purpose.

Banks offer different SBA loan types, including the popular SBA 7(a) Loan, which an entrepreneur might use to launch a business, buy, build or upgrade a building, purchase new machinery, or designate for working capital.

While any loan requires the borrower to meet lender requirements, SBA loans come with their own specific eligibility rules.

Asset-based financing

Companies with short-term cash needs may be able to get a loan based primarily on their balance sheet assets, such as inventory or accounts receivable.

Asset-based financing can help businesses that might not qualify for conventional funding or face difficulty in forecasting future performance. Usually offered as revolving credit, asset-based financing also tends to provide more flexible terms and lower pricing than more conventional loans.

With any type of borrowing, you'll need to meet your lender's requirements for the selected loan type, providing requested documents — for example, business and personal tax returns, a business income statement, your business plan and financial projections — and meeting thresholds for credit scores and the amount of time your company's been operating.

BBVA offers a variety of financing options for companies at various stages across an array of industries. Our experts can help you determine the option that best fits your unique business.


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