6 Small Business Loans and Financing Options to Fund Your Houston Business
Proven methods for financing common small business needs
From angel investors to crowd-sourced platforms like Kickstarter, there are now several creative ways you can fund your business in 2018. While both of these financing examples provide interest-less capital, each require you to give up a degree of control. There are no guarantees with Kickstarter, and angel investors often require equity in your company.
On the other hand, banks can seem daunting and bureaucratic. But approval processes and regulations shouldn’t scare you. Many are actually meant to protect you. A good bank won’t let you borrow more than you can afford to pay back. Great banks will put you in a flexible, custom loan structure that meets your specific business and project needs.
Here are a few of the most popular business financing options:
Business Real Estate loans can be used toward commercial and investment properties. To clarify, commercial applies to space you intend to rent out to other businesses. Investment refers to any property you buy for the return—either through rental income or resale.
Sometimes called “revolving credit,” many businesses keep a constant line of credit to supplement or strengthen cash flow. Its overwhelming popularity comes from its supreme flexibility. Unlike most loans, you don’t have to earmark the money for a specific purpose. Line of credit covers any business-related expense.
It’s not hard to determine what kind of business SBA, or Small Business Administration, loans suit best. Government sponsored, these loans help entrepreneurs just entering the market. They also assist modest businesses looking to grow.
Within the SBA Loan family, there are two main chapters: 7(a) and 504. 7(a) usually offers more options. It’s the go-to choice when acquiring a business or obtaining working capital. 504 can be a good choice for commercial real estate or equipment.
Nothing’s more frustrating than inefficient equipment. It’s one thing when you can’t keep up with the workload; it’s another when your equipment can’t. After all, time waiting is money wasted. Automation technology—bots, AI, etc.—can raise your production exponentially and is often worth the investment. Similarly, commercial vehicles can carry more weight and help legitimize and brand your business. Sound appealing? Equipment loans are designed specifically for these kinds of scenarios.
Most non-service sectors require raw product. Construction needs nails, hospitals need medicine, and grocery stores need goods to fill their shelves. Inventory loans cover all these industries. In general, the more you can afford to buy in bulk, the lower your per unit cost. Inventory loans help you capitalize on wholesale prices and exclusive vendor relationships by giving you the funding up front to pay for raw product in quantities you normally couldn’t afford.
Most companies suffer from unpaid invoices. Past due bills hurt cash flow, complicate accounting, and—at their worse—stunt production. Accounts Receivable (AR) Purchase Solution helps keep the cash, and your operation, moving.
AR Purchase, or Factoring, is designed for fast-growth companies of all sizes. Oftentimes, it’s ideal for businesses with little-to-no collateral and a high dependencies on accounts receivables—AR rich, but cash poor. The more you can redeploy factored cash, the better value you’ll get from this form of financing.
Need help finding a good lender? Check out our helpful commercial lender screening questions to help you decide.