When a company is in its startup phase it is often struggling to make ends meet. While this difficult period will often resolve itself once a company develops a stable retinue of revenue, the initial start up period can be very challenging. Lenders are often not interested in lending money to a company that doesn’t have a track record of earning profits and repaying money that it borrows. Luckily there are many sources of financing from the best factoring companies that a start up business can turn to to finance their business.
One of those sources are loans from the Small Business Administration (SBA). The SBA is a governmental institution that provides funding to small businesses that meet certain criteria. The theory behind the agency is that it is small businesses more than larger entities that create jobs and help to spark growth. By supporting these smaller entities during their growth phase society in total benefits. For small businesses looking to obtain financing in the short term an SBA loan may solve an immediate financial need and help your business move past it’s difficult early stages so it can grow and flourish.
While a lender may be hesitant to loan money to a small business without a credit history the same statement may not be true of you. One alternative available to a small business owner is to personally guarantee a business loan. Of course this leaves the small business owner personally liable for the loan if the business fails and can result in their assets including a private residence being lost, a personal guarantee may help secure financing that allows a small business to succeed. A decision to personally guarantee business debt should not be taken lightly however and much care and consideration should be taken first.
A small business borrower may need to patch together a network of borrowings with small personal business loans and even credit card debt or may need to issue convertible debt to investors. Convertible debt is convertible into equity in the business meaning that the lender may own some of your business and this can prove to. Be quite pricey when all of the facts are considered. Credit card debt and personal loans can also have high rates of interest and should only be used when necessary or when other options are already examined.
While many of these loan options may not be ideal for a borrower they remain some of the easiest ways for small start up companies to obtain access to loans. As their businesses mature and they develop a better track record with lenders it will commonly make sense for them to explore different types of loans.