Are you a small business owner currently debating whether or not to apply for financing? Applying for one is definitely a big decision to make, and you want to make sure that you’re making the right choice for your business to prosper after all. Here are eight benefits of financing for small businesses.
It Improves the Cash Flow
If you’re having a difficult time balancing the cash flow of your small business, then having a business line of credit will help ease the heavy burden. With financing, you can pay employees and suppliers while waiting for customers who are paying invoices and accounts receivable.
Have Access to a Large Amount of Capital
Small business owners can borrow large amounts of money to operate their businesses depending on the kind of small business financing and the purpose behind the funds. Typically, accessing a large sum of capital can be difficult for small business owners as traditional banks will only lend out small lumps of cash to even recognized businesses. Through SBA funding, small business owners can borrow up to $5.5 million through the 7(a) loan program, making access to a considerable amount of capital attainable.
Provides More Flexibility
Borrowers may opt for additional funding to reach their small business goals. To satisfy financial needs, entrepreneurs may have to apply for many types of financing. Long-term financing lasts long, while short-term funding is only for a specific period. Regarding the financing duration, business owners can choose between business, personal, and mixed-use. Although short-term funding options are common, they can be prolonged for five years or even longer.
Lower Rates
Traditional banks offer standard business funding options with a lower interest rate than other options, such as short-term funding like cash advances. This is because conventional funding options come from big establishments or government agencies that provide long-term financing with not-so-expensive rates that typically take longer to get approved. When there’s a low-interest rate, then it means there’s a lower repayment amount.
It can Be Used to Purchase Additional Inventory
Specific small business financing options cater to purchasing additional equipment or inventory. When you apply for financing, you can easily buy the latest technology that will help improve your business and boost sales.
Improves Business Credit Score
Applying for small business financing can help enhance your business’s credit score for as long as the repayments are made in time. Similarly to personal funding, doing so will increase the chances of obtaining future financing for even more significant sums of money.
Additionally, having better credit ensures you get better rates along the way, helping small business owners avoid accrued interest. You’d be surprised by how small changes in your rates can significantly impact the final amount paid.
Have Access to Funds Conveniently
With small business funding, you’re conveniently given access to funds. They are relatively straightforward, even for small business owners, to get a hold of. With so many options available, entrepreneurs with poor credit can find a funder.
While it can be challenging to find an investor quickly because they prefer well-established businesses, funders are also open to newly-established business owners. Typical business financing options can be built to let the business invest a percentage of its profits into the business instead of having to pay it off immediately.
Creates a Contingency Fund
You may have heard of the term “emergency fund” well, those aren’t just for personal use. Having money in a separate account for unexpected costs is a smart move, even for a small business owner. In many cases, having a cash reserve helps a business stay afloat from one year to the succeeding one. Applying for small business funding is the fastest way to have a decent-sized emergency fund. That way, you don’t need to make a dent in your personal savings and have an immediate fully-funded contingency savings account.
Final Thoughts
Small business owners need every help they can, especially if they aren’t fully established yet. Here at REIL Capital, we can help by presenting a comprehensive selection of funding options for your small business, and together we can determine which one would be the most suited for your needs. Apply now, and let’s work together!
