The prospect of small business financing is shifting persistently, with more lending options accessible to small businesses. Thousands of small businesses daily look for financing options from different sources, from angel investors to private lenders. As there’s a shift in lending marketplace, businesses often have to financial challenges to take benefit of growth prospects. It’s also important for small businesses to consider the right financing option for their financial needs. Currently, traditional lenders have tightened their lending criteria, and businesses are moving to alternative financing options.
The most obvious answer is that businesses ask financing when they’re in need of quick cash injection to take benefit of an opportunity or to handle an unexpected emergency. As a business owner, you might have solid business planning, but you might not have surplus money.
Often, small businesses don’t have enough cash flow or line of credit to use funds for profitable opportunities. In such cases, alternative financing helps fill the gap by providing small businesses quick access to capital. The bitter truth is traditional lenders are reluctant to lend to small businesses.
With alternative financing, small businesses can take benefit of the following opportunities:
- Acquiring stock, equipments or raw material at a discounted rate, like a franchise business making opportunistic buying of a location during the holidays.
- Taking over a partnership business by buying out a partner to retain all business profits
- Opening a new store to different regions
There are many other situations when a business is in need of quick cash to handle an unforeseen crisis like harsh price fluctuations that impact your business bottom line, weather conditions which can cause a business closure, or occurrence of an unexpected event that calls for quick injection of working capital, such as an equipment stops working or inventory needs more production.
To conclude what type of financing best suits your financial needs, you need to consider what to be funded and at what time. Alternative business financing offers repayment flexibility with creative options, including small daily payments that vary with the sales volume. The lenders fee is one important element that every business owner must understand before choosing an alternative lender. Sometimes, such lending options cost more than traditional lending since these lenders guarantee payment by acting as liaisons. Basically, they take up the risk and losses when a borrower defaults on payments.
Whether you’re a health care business, retailer or a servicing business probing your financial condition to get the best financing option, getting quick working capital can be a prime element in whether or not your business thrives or goes on. Choose wisely when it comes to fund your small business!