Building and running a business can be backbreaking – and heartbreaking. Sometimes even in your best months you can have cash flow problems, which are not only stressful but can keep your business from growing as you want it to. If you are facing some financial trouble, here are some options.
Cash flow. Cash flow banking has many advantages over getting a loan from the bank. If you have a whole life insurance policy, you can use it for some needed capital. You can get the money right when you need it, without going through the usual process for a loan like when you go to the bank. All you have to pay is the annual loan interest; you don’t have to pay back the principal.
Business credit card. If you can’t go the cash flow route, a business credit card can be another option. Just like a personal credit card, you don’t have to go through the process of applying for a loan – all you have to do is apply for the card. You will, of course, have a minimum monthly payment and a credit limit, and you will have to pay interest. Nowadays, applying for a credit card is easier than ever, and you can have a “yes” or “no” answer almost instantly.
To make the most of your business credit card, choose one with rewards that can help you. For example, if you travel a lot, apply for a card that gives rewards that help pay for flights and hotels.
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Emergency loan. You never know when an emergency will come up, but they usually seem to strike at the very worst time. If you need some funds right away, a short term loan might be the answer. They can be quickly approved, and they are also a good option if you have a low annual revenue or if you haven’t been open for business for very long.
Equipment loan. As a business owner, you know that sometimes you walk a fine line – without the right equipment you can’t bring the customers in, but new equipment might just break the bank. A loan for equipment can help. Depending on the lender, you may have to provide a down payment of up to 20% of the total cost of the equipment. You then pay the rest off with scheduled payments, including fees and interest.
What To Know Before You Apply for a Loan
If you decide that a loan is the right move for your business, there are a few things you should know.
- Before you decide to apply for a loan, you should check your credit score. Knowing your score (which is good information to have, even when you’re not considering a loan) can help you when you are shopping for a loan.
- Whether you get an emergency loan, an equipment loan, or another type, you will have to guarantee the bank that you will be able to repay the loan. You will have to have collateral, even if you own a corporation or a limited liability company. If your business is a partnership, all of the principles involved will have to provide collateral.
- Make sure you have all of your financial ducks in a row – prepare documents such as balance sheets and income statements so you can tell the lender everything they want to know.
- Don’t just apply for a loan at the place you’ve been banking at for years. You should check different rates and terms, from larger banks, smaller banks, and internet lenders. You might be surprised at how different lenders can be.
Having the money you need when you need it is one of the biggest challenges of owning a business, but if your business is going through a tough time, you do have a few options to choose from. As always, do some research so that you fully understand your options and so that you can get a loan that works best for you and your business.