Mon 21 Jan 2008
To ensure that your small business grows steadily, you may require funds to cover expenses and make new investments.
Here are a few ways to get a loan using the income from your business.
Get a Bank Loan
You could apply for a bank loan against your business profits. The rate of interest is usually around 6% to 9%, but you will have to put up some collateral against this type of loan. Collateral could be in the form of your business or residential property or even your business' stock.
The documentation required by banks is extensive, and even if you can arrange a loan through the SBA, you will still be required to submit detailed documents about your business and its income prospects.
Contact a Factoring Company
If your sales are mostly to credit customers, then contact a factoring company. They will pay you the invoice amount minus their fee almost immediately, and they'll also take over your collections headache.
This will improve your cash flow immediately and help your business grow faster. The documentation required is also not very extensive, compared with the banks.
Use Your Credit Card
You could use your credit card to get an instant loan without any documentation, but the interest rate will probably be extremely high. In addition, failure to pay the outstanding amount will result in you paying more in interest.
It could also negatively affect your credit rating, which will have a direct effect on your ability to secure financing in the future.
If your business shows great potential, then venture capitalists can help you by investing in your business in exchange for a share in your profit margin.
However, they can become co-owners of your business and can even take over your business, depending on how many shares they own.