How Do I Finance My Business?
As a small business, securing exactly the right amount and type of capital you need to succeed can often be the most daunting task. Not having the right cash flow could be the catalyst that keeps your business from growing or succeeding but securing the right funding with the correct lender could be the debt risk you’re most afraid to take. So, what do you do?
You have made the important decision to start a new business or expand your existing company. The first question most business owners ask is “how do I finance my dream?” There are several options to consider when choosing the right financing structure.
ACCOUNTS RECEIVABLE / INVENTORY FINANCING
Also known as factoring, this type of financing is expensive and generally short term. Many companies use factoring to cover short term capital needs that are secured by accounts receivable, inventory and even machinery or equipment. If you have a healthy business, an A/R loan can be secured through traditional lending sources at more favorable rates. However, if your business is unable to obtain conventional financing for whatever the reason, factoring may be an alternative.
SMALL BUSINESS ADMINISTRATION LOANS
The SBA has several programs available to business owners which allow you to purchase real estate for your business, obtain working capital, secure machinery and equipment or buy out an existing partner with as little as 10% down. Most people are not aware that SBA loans can also provide up to 90% of the cost of constructing a new building or expanding your existing one. SBA loans are commonly used by:
- Medical Professionals
- Lawyers, Attorneys and Accountants
- Manufacturing / Distribution Companies
- Start-Ups and Franchises
By far this option has the lowest interest rate available, but it does come with certain conditions. For example, your business must be seasoned and profitable. The level of debt you will be able to borrower against your business assets and real estate owned will be less than with the first two options. You may also be required to use the lender providing the financing as your primary banking relationship. More importantly, your fees and costs to close will be less than with either a SBA Loan or factoring.
Progress Capital Advisors is experienced in all aspects of commercial real estate and business financing. Please give us a call and we will work with you to formulate a financing plan to meet your specific needs. Having the right advisor will allow you the freedom to do what you do best – run your business.