How to fuel your growth safely and fund your small business in America

Growing company - business growth

Small businesses in America don’t just embody the quintessential American Dream; they fuel the ethos and keep it alive. They’re the backbone of the economy, adding charm and flavor to local communities. Small business owners bring unmatched passion and dedication to their businesses – all the more reason to ensure they grow and thrive in the longer term!

Every growth story needs the right push at the right time. For small businesses, this push could come from funding – for new equipment or to implement new ideas. A much-needed injection of cash can help small businesses serve their customers and market better. So let’s talk about the most common funding options available and what might be the best one for your business.

Loans

Loans are perhaps the most common type of borrowing instrument. You could borrow from banks and other formal institutions or from online lending entities. Each has its pros and cons – banks might lend you funds at a lower interest rate if you have a business credit score of 700 and above. However, the application process and documentation might be time-consuming. But if your credit score is not up to the mark, banks might reject your loan application or charge you a substantially higher interest rate.

On the other hand, online lending institutions are often quick to disburse loans thanks to their short and breezy application and approval systems.

Merchant cash advances

This funding option allows you to borrow working capital as an advance against future income from sales. Application processes are considerably short, often taking minutes to submit. Approval, too, usually takes 24-28 hours. Unlike traditional loans with a fixed term and an interest rate, merchant cash advances can be repaid with a percentage of future sales.

If your business credit score has dipped in the recent past, a merchant cash advance might be the best option for you. However, it is recommended to borrow only from credible, reputed lending entities that you can trust. All Year Funding is a great option, trusted by hundreds of companies all across America with private investments of over $47,000,000.

Investors

There are several ways to get investors on board. To take your business to the next level, it is a great idea to partner with venture capitalists and private equity firms. Not only do they have deep pockets, but they also come with a wealth of specialized experience and expertise – they can help you achieve your goals no matter how ambitious they seem to you. However, this type of investment could come at an ownership cost – investors will want a stake in your business and might make profit-oriented business decisions as part of your growth roadmap.

A milder version could be borrowing from friends and family. But in this case, there is the risk of strained relationships.

Crowdfunding

This is an up and coming option but a promising one. Financial analysts expect the crowdfunding market to be worth as much as $300 billion by 2025 – that’s a lot of money! To crowdfund your business, you have to convince a complete stranger that your business is worth their while – and their hard-earned money. That’s the tricky part. You will have to begin by creating a positive social media presence for your business, build your brand, and perhaps a loyal, paying fanbase.

For some types of companies – a cafe, bakery, pet clothing company, for instance – this might be easy. For others like a welding and metal craft business, not so much! You can use sites like Kickstarter, Patreon, GoFundMe, etc. to list your business and request funds. Usually, backers expect early access to your products, an insider view into your creative process, or something of tangible or intangible value.

Small businesses are spoilt for choice

The funding list above is definitely not exhaustive. Other funding options include but are not restricted to bootstrapping, government grants and support schemes, peer-to-peer lending, corporate funding programs, angel investment, startup pitch contests, hackathons, and many more.

Small business owners are incredibly fortunate today – they can leverage technology to find and pursue opportunities to grow organically or pump in additional funds to speed up the process. They can reach customers despite geographical limitations and diversify to capture newer revenue streams.

However, with an increase in opportunity availability comes the elevated risk too. There is an alarming spike in scams targeting small businesses, enticing them with funding terms and conditions that are often too good to be true. It is of utmost importance to check lender credibility before getting into any formal, contractual loan agreements.

Scrutinize before you sign on the dotted line

Before you zero in on the funding option that suits you best, take some time to get to know your lending entity. Don’t jump the gun based on superficial information like rate of interest, their readiness to lend you funds despite your low business credit score, etc. Find out how much time it would take for the funds to reach your account and what their application process looks like. Loans applications are known to be notoriously slow and long-winded.

Similarly, find out if there’s any safety deposit or collateral to be pledged; there are secured and unsecured loans – check out which one is being offered to you. Are you borrowing directly or through brokers? All this information will impact how quickly you can access funds and how much you will need to pay back.

Most importantly, assess your lender’s security policies. In all likelihood, your business deals with customer data. With stringent regulations and compliance requirements around data protection, it is critical to ensure that your lending entity adheres to the highest security and data protection standards.

Bank-grade encryption is non-negotiable; a lender with dodgy security practices might offer you a cheaper loan, but any breach or misconduct relating to data can be devastating in terms of fines as well as your business’s reputation. Only borrow from a lending entity you can absolutely trust; prioritize transparency and security over quick-fix cash from questionable sources.


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