Which finance option is right for your small business?

By Rosana Beechum

Many small business owners need to come up with extra financial resources from time to time. This is particularly true during the start-up stage, but can also occur later, such as when you’re undertaking a new strategy to promote further growth. Depending on how developed your business is, you may be able to borrow against either the value of the enterprise or its expected future profits. There are many options if you’re not looking to give up equity. It’s the personal choice of the founder(s) which way they wish to go – equity, debt, or a mixture of both to raise capital.

Let’s look closer at the basic options for financing your business.

Many smaller entrepreneurs first turn to friends and family to raise early investment capital. This can be provided for a stake in the business or just as a loan. While the loan will likely be unsecured, being that it’s from friends or family members, you’ll be on the line to repay it even if the business folds. Otherwise, you will lose friends and won’t be welcome at the family dinner table at Christmas either! Given the emotional stakes, borrowing from people you know carries with it an uncomfortable proximity to your personal life that isn’t always a pleasant way to raise capital.

Unsecured business loan

An unsecured business loan from Become is another option. They provide unsecured loans to help businesses fund a variety of startup expenses. Most lenders offer from $5,000 upwards, but it depends on the ability of your business to steadily repay the loan over time as to the amount for which your business can qualify. Lending can be approved within a few hours once the various checks are made to confirm the validity of the business loan application.

Merchant cash advance

A merchant cash advance is focused around businesses that are strapped for cash but have credit card or debit card billables that are already charged and forthcoming. The use of a merchant cash advance is helpful to get through tough trading to better trading without hitting a financial wall. It also doesn’t necessarily tie the business to a long-term financing deal, which not every owner wishes to accept.

A line of credit is another way to go. A business will qualify for a certain line of credit that’s agreed in advance. They can then draw down on that credit line as and when they need it. The beauty of the arrangement is that they pay for the money needed at the time and aren’t stuck having to take out a larger loan with repayment over several years.

The cost of credit can be lower when only taking what the business needs and replacing it promptly once more funds are received from sales. This type of financing is useful for seasonal businesses that occasionally need extra funds available, but not all year round.

There’s no one right choice as an entrepreneur looking to get extra funding for a business. Each lending option is suitable for different operations and business life cycles. Taking the time to choose the most suitable one for your company will save you possible heartache later.


Rosana Beechum is a business and marketing undergraduate from Nottingham Trent University from the UK, who is attempting to share her knowledge through writing articles for small business owners.

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