There are several types of funding option available to support small businesses. Here is a guide that will help you know the right option for you:
1. Line of credit
Using a line of credit as working capital can make it easier for you to manage your cash flow as your income or expenses fluctuate. It allows you to borrow only the funds that you need giving you more control over the amount of interest you will accrue.
2. Business loans
For larger investments, it may be time for a term loan. Like a mortgage or personal loan, term loans come with fixed interest rates and monthly payments over a period of years. Unlike a line of credit, a business loan will provide you with a large sum of cash up front. These loans can be ideal for expanding your space or funding other large investments.
3. Commercial loans
For established businesses that own commercial real estate, a commercial loan is another option. Like a home equity loan, a commercial loan allows you to borrow against the equity you've built in your business property. Depending on the value of the property and the equity you hold, this could mean more borrowing power.
4. Equipment loans
If you're specifically looking for cash to fund the purchase of new equipment - including vehicles, manufacturing or production machinery, farming equipment, or other necessary equipment - then an equipment loan or leasing program may be what you need. Like business loans, equipment loans offer fixed interest rates and payment plans over a period of time.
5. SBA loans
Wells Fargo, America's leading provider (by dollar volume) of loans guaranteed by the US Small Business Administration 1 - or SBA 7(a) loans. SBA 7(a) loans have longer repayment terms and lower down-payments than most conventional bank loans, and can be used for the purchase of owner-occupied real estate, business acquisition, equipment, or working capital. Wells Fargo also offers the SBA 504 program for larger, fixed asset purchases or construction.
6. Federal or state grants
Small business grants - money that does not need to be repaid - are limited and harder to secure than loans. State and federal business grants are funded by taxpayer dollars, and the money is awarded through a complicated legislative process. For more information on how to get a small business grant, visitwww.grants.gov