In business, you only ever have two things that you can employ in the never-ending hunt for cash: a hard money loan that will put you in debt, or equity financing using physical assets as collateral or backing. In most cases, the physical asset is a piece of your business; similar to what stockholders possess. Both have their merits and drawbacks, and you will often find that a combination of the two works just fine in securing the finances you need.
There Are Many Types of Debt Financing
This is big business, and so you should expect a multitude of conduits for debt financing. The first is your traditional bank loan, which has good interest rates that can be costly to come by unless you have good credit. Even better – but even more stringent – are government loans backed by the Small Business Administration (SBA).
Next for we have some of the alternative sources, starting with the relatively unregulated market of merchant cash advances. The rates are quite high, but this is an option for those who cannot qualify for loans; you pay the interest from daily credit or debit card receipts. Lines of credit and business credit cards round out this section.
The Equity Financing Primer
If you cannot or do not wish to take on debt, you can always offer a slice of your business in exchange for working capital. Again, there are three major types of equity financing – any others are really just variations of the following.
Venture Capitalists are persons, people, company or other wealthy collective interested in providing funds for promising start-ups in exchange for equity in the business. Their investment is based almost entirely on the potential they discern from the numbers and idea, itself. Only if this potential is realized do they benefit: by either buying shares or the entire business.
Angel Investors are very rich persons who provide cash in exchange for equity – an immediate quid pro quo. Of course, their shares grow in value with the success of the business.
Crowdfunding – specifically equity crowdfunding – involves breaking your company down into small pieces that can then be purchased by interested investors. Usually, common people with a large degree of interest in the product or service become the shareholders.
To get the financing you need, contact 360 Commercial Capital today.