What Is Business Funding?
Put simply, business funding is the process of taking out a loan specifically for your business. It’s not like an auto loan or a home loan that’s signed in your name. It’s money that a lender gives to your business in exchange for repayment with interest.
But there are many different types of business funding. Here are just a couple that you should be aware of:
Short Term Business Loans
These are probably what you think of when you hear “business funding.” You receive a lump sum up front, and you pay it back over time with interest. In general, you can use these loans for anything related to your business.
These business loans
have the advantage of being very predictable, both in the amount you receive and in your payments.
Unsecured Business Loans
Most banks require that you offer some collateral when you get a loan. That means if you can’t repay your loan, you lose that asset. We don’t like that model.
Which is why we offer unsecured business loans
. No collateral required. This is especially useful if you run a business with few physical assets.
How can we afford to offer this? By taking more factors into account during the qualification process. We’ll talk more about this in a bit.
Merchant Cash Advance
If your revenue is unpredictable or varies by season, a merchant cash advance
can help ease the repayment process. Instead of paying back a specific amount every month, you agree for your lender take a specific amount from every credit card transaction (usually about 5%).
If you have a slow period, your repayment slows down. If you sell a lot in a particular quarter, you make more progress toward your repayment.
Business Line of Credit
Like a credit card, a business line of credit
can be used over and over. You have a specific amount of money available to you. Whenever you use it, you’re put on a payment plan to repay the amount you used.
You can pay it back in monthly installments or wipe out your debt quickly by making a big payment when you’re able. These loans are especially good for companies who need to make fast purchases or take advantage of short-lived opportunities.
Bad Credit Business Loans
Unlike traditional lenders, alternative loan providers work with business owners who have bad credit by offering business loans for bad credit
. We take more factors into account when processing your application, so we can make a better decision on what you’re qualified to borrow.
This is a huge help if you don’t have great credit. If you’ve lost even a few points from your credit score, you might have trouble getting a loan from a bank. But alternative lenders are much more flexible.
Advantages of Business Funding
The benefits of getting business funding are nearly limitless. In any situation where you need cash, you can get it—and if you work with an alternative lender, you can probably get it in a few days instead of weeks.
If you’re focused on running your business successfully, that means you can take advantage of opportunities you might not have been able to otherwise.
Maybe one of your suppliers is having a big sale and you want to stock up. Or you want to bring on an extra employee to deal with increased demand during the holidays. Many business owners use loans to help them through difficult situations when a piece of equipment breaks.
And there are benefits for expanding businesses, too.
Growing a business often requires capital up front. Maybe you need to open a new location, and that requires putting a down payment on a lease. Or you want to buy a bunch of new equipment to improve your output capacity. You might just need a bit of extra cash on hand to deal with the attendant problems that growing companies face.
Any of these situations are great uses of business funding. It can be difficult to keep a lot of cash on hand, especially if your company uses very expensive equipment. But you’ll need that cash when you want to successfully run or grow your business.
The Advantages of an Alternative Business Lender
Getting a business loan from a bank can be a hassle. If you don’t have great credit, you probably won’t get a loan. And if you do, you’ll get poor terms. You’ll also have to go through a lengthy application process and wait several weeks to get your money.
Alternative lenders—like Shield Funding—solve all of those problems. We work with people who have bad credit. We don’t require that you’ve been in business for years. The application is fast (you can often get a decision within a couple hours). You get money fast, too—usually within a few days.
And because we’re not bound by the red tape of a traditional bank, we can offer loans to a lot more people. Business owners with bad credit, relatively new business owners, and businesses in industries that might have trouble getting a bank loan are all welcome here.
Disadvantages of Business Funding
While securing funding is almost always a huge help to your business, there are a few negative factors to consider.
The main disadvantage is that getting a loan costs money. You’ll pay fees on top of the principal borrowed, that’s just how business funding works. So you’ll want to work with a lender who provides the best rates and terms possible and ensure that the reasons for borrowing make economic sense.
Another disadvantage is there’s always a possibility you won’t be able to get business funding. If you have especially bad credit, if you haven’t yet started your business, or face other difficulties, you could invest time and effort into securing the funding and in the end you are denied.
Which is why working with an alternative lender is a good idea—there are fewer cases in which you’ll be denied funding.
Can You Really Get Business Funding With Bad Credit?
Yes. You absolutely can. We work with lenders who have credit scores of 500, which is far below the limit you’ll find at a traditional lender.
In fact, some alternative lenders will give you business funding with no credit check. If you don’t want your credit history to come into the equation at all, this is a good way to go.
How is this possible?
Alternative lenders take many factors into account when determining how well-suited you are for a loan. For example, we’ll look at how long you’ve been in business, how much revenue you typically earn in a month, your typical expenses, and so on. That’s a lot of factors that speak to how likely you are to pay back the loan.
We think this is a much better way to do business. Lots of people have bad credit not because they’re untrustworthy, but because they’ve made mistakes. That doesn’t mean you shouldn’t get a business loan.
Is Business Funding Right for You?
There are many factors that go into deciding whether you should get a business loan. But in general, if you’re running a business, you can use business funding to your advantage.
You can use it to grow your business, which helps you both pay back the loan and earn more in the future. It’s a win-win.
There are few cases in which business funding might not be a good idea. If you’re unsure of the future of your business, for example, it’s important to take a good look at whether or not a business loan will be able to keep it running and profitable.
But in the end, it comes down to what you want to do with your company. If you want to grow, expand, take good care of your employees, and drive profits, business funding can help.
Not sure if business funding is a good choice for you? Want to find out about the loan products we offer? Looking for help figuring out which type of funding will help your business the most? Get in touch today!