5 Funding Options for Businesses Outgrowing their Resources

A growing business is a huge sign of success. But, with growth comes the need for more employees, a larger physical building, more IT assets, and tons of other requirements. The problem often boils down to paying for these expenses. You don’t want to stifle your business’ growth by not giving it the resources it needs but you also don’t want to put your business at risk of a financial hardship.

If your business is outgrowing its resources, there are plenty of funding options to consider. Keep reading to learn about the top 5 options that can provide the cash flow your company needs to continue its success.

  1. Small Business (SBA) Loan

SBA loans are well-liked for the agreeable terms, including a long pay-back timeline as well as low-interest rates. These loans are partially backed by the government and can be used for all types of expenses, including the purchase of inventory, real estate, and even to refinance existing debt.

To qualify for a SBA loan, your business must have at least 2 years under its belt, an above average credit score, and consistent annual revenue. These loans allow for up to $5 million in funding and as little as $5,000. While this is one of the most versatile business loans available, expect a lot of paperwork and a lengthy processing time.

  1. Short Term Loan

Pay day loans, also known as short term loans, can come in handy when your company needs quick access to cash. A short term loan must be paid back in less than a year and can provide your company thousands of dollars, quickly. Of course, before applying for a short term loan, you want to ensure that you can afford the short payback term. The more money you borrow, the larger your repayments will be.

While these loans provide quick cash, the interest rates are generally high. Short term loans are best reserved for emergencies, cash flow problems, and for short term debt. The key to being successful with this type of lending is to have a steady amount of income each month. Otherwise you risk falling behind in payments.

  1. Business Line of Credit

A business line of credit provides a maximum loan amount that a lender allows a borrower to use. The borrower is able to withdraw funds at any time, as long as the amount doesn’t exceed the loan. One of the biggest benefits of a business line of credit is that you only pay money on the funds that you withdraw. If you apply for a $10,000 line of credit but only use $8,000, you’ll only pay interest on the latter amount, not the full line of credit.

A business line of credit is best used for short term funding, such as supply and equipment purchases, cash flow issues, or expansion needs. This type of funding can be used by large and small businesses and is relatively easy to apply for. Lenders of all types, including online lenders, offer this type of loan.

  1. Business Credit Card

A business credit card is much like a personal credit card. A lender will offer you a set amount of funds and they can be used for all sorts of business purchases. When choosing the right business credit card, you want to consider the fees, APR, credit limit, as well as your business’ needs. There are all sorts of perks to using a business credit card including:

  • Perks and rewards
  • Low interest rate
  • Quick access to funds

Having a business credit card can be tricky. Ensure you don’t mix personal expenses with business expenses. Otherwise you risk all sorts of issues come tax season.

  1. Equipment Financing Loan

If your business is growing, chances are you could benefit from more equipment. From IT equipment to machinery used to create your product, more equipment means sustained or improved efficiency. For a loan meant specifically for purchasing equipment, look into an equipment financing loan. This type of funding allows you to use the equipment as collateral and has a quick turnaround time. Having quick access to cash for equipment means no worries of business interruption.

The process of applying for an equipment financing loan is easy. There is limited paperwork and businesses of all types usually qualify. One drawback to this type of loan is that equipment may be obsolete by the time the loan is paid off. You’ll want to ensure you’re purchasing the best and most recent equipment when using this type of loan.

Conclusion

There’s no better feeling than knowing that your business is growing. To keep your business on the upward tick, keep these funding options in mind. With the right financing option, the stress and cost of hiring new employees or buying a larger storefront is minimized.

What have you done to fund a growing business?  Share your story in the comments.