Need Just a Little Business Financing? Here’s Where to Look

By Maria Valdez Haubrich

It seems like the economy might finally be on a permanent upswing. But even though economic indicators are looking more positive, that doesn’t mean your chances of finding business financing are improving.

Ironically, getting smaller amounts of financing for expansion can be a particular challenge. If you need some quick capital right now, you’re going to have to think creatively about ways to get it. Consider the following ideas.

Credit card financing: While experts used to warn against this method, it’s become more acceptable, simply because fewer financing options exist today. Used wisely, credit cards can be a great cash flow management tool. Just be sure you keep the amounts borrowed manageable so that you can make timely payments.

Home equity: In some regions of the country, falling home values have rendered this financing method nearly obsolete. But if you’re fortunate enough to have equity in your home, tapping it can be an option. Be sure to carefully weigh the risks against the potential benefits and make sure you can pay the money back so your home isn’t in jeopardy.

Retirement plans: Tapping your retirement plan such as a 401(k) is another possibility, but whether this is right for you will depend on how much money is in your plan, your risk tolerance, and how close you are to retirement age. Be sure you understand how (or if) you will be required to pay the money back, as well as any fines or penalties involved.

Factoring: Factoring companies buy your business’s receivables and collect the funds for you, then take a percentage of the amount as payment. You won’t get the full amount of your receivables, but you will get quick access to cash. Make sure this tradeoff is worth it to you. Also be sure you are dealing with a reputable factor and that you understand the interest rates and any fees involved.

Microloans: Community organizations are one source of microloans, which, as the name implies, are for smaller amounts of funding (usually under $50,000). The loans are often aimed at certain entrepreneurial categories. For instance, you might find microloans intended to encourage women business owners, military veterans or people whose companies are located in poor areas. The SBA has a microloan program; your local economic development department can help you explore microloan options in your community.

SBA loans: The Small Business Administration (SBA)’s SBA Advantage program offers a simplified loan application process for 7(a) loans of up to $250,000. Small Loan Advantage loans are made by SBA-guaranteed banks; Community Advantage loans are made by nontraditional financial institutions to help underserved communities.

Image by Flickr user photosteve101 (Creative Commons)

This entry was posted on Thursday, February 23rd, 2012 at 6:00 am and is filed under Capital Access, Raising Capital, Small Business, small business. You can follow any responses to this entry through the RSS 2.0 feed.


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