If you just launched your business, you may have difficulty maintaining a balance between your current assets and liabilities. A lack of balance can lead to a deficit in working capital, which could make it difficult for your business to meet its daily expenses. You need to choose the best lending option for your business working capital requirements.
Loan experts have compiled the top five ways a new business owner could get working capital and easily repay loans.
Read: How To Get Online Personal Loans Fast
Business Loan
Businesses often turn to a business loan for working capital. You can easily get this loan from a bank or financial institution. A business loan is an agreement between the lender, the business, and themselves. The lender lends money to the company in a predetermined amount and expects the business to repay it within the agreed timeframe. The principal amount of these loans are subject to interest, which must be paid to the lender.
You can take out a personal loan to fund your business, but choosing a loan tailored to your needs is better. Some business loans are great for starting a small business. Others can be used to purchase new machinery or equipment.
Business loans require both a good credit score and a strong business credit history. These loans are based on the company’s creditworthiness and the history of previous payments. Business loans can also be made available by offering collateral like personal property or company shares.
Most business loans in have annual interest rates of between 8% and 18%.
Business Line of Credit
A combination of regular loans and business cards can be described as a business line of credit. These are available from banks and other lenders who fall under the umbrella of revolving credits. This capital can be used to fund your business’ working capital requirements. You can repay the loan immediately or spread it over a pre-decided period. Once the loan has been borrowed, the interest rate is applied immediately to the amount. The lender must approve a business line of credit. This approval is subject to credit scores.
A business credit line is similar to a loan because it takes into account credit history, repayment ability, collateral, and availability with the borrower.
Business Credit Cards
These cards can be used to keep professional and personal expenses apart.
These cards are also called Corporate credit cards. They are designed specifically for business use.
Business credit cards can be used to fund your company’s working capital. These cards can be used for purchases, payments, and bookings. A business credit card is a great option for small business owners who don’t need large amounts of working capital. It doesn’t require you to wait for approval from banks.
A well-maintained credit card for small businesses can help you build credit and gain access to loans.
Specialized Funding Assistance from a Fintech Company
A company that specializes in working capital can be a partner for your company. This will help you to plan for working capital. Fintech companies make use of technology to provide financial services to their customers. They offer expert platforms that can boost any company’s finance system. These platforms can also be used to raise working capital for new companies. These are more technologically efficient than traditional sources of working capital and are often preferred. A fintech company can help you get a loan within minutes or days.
Angel Investors
Angel investors are people who typically fall within the high-net-worth bracket. These people offer financial assistance to new ventures and businesses. This assistance is often offered in exchange for a share of the business, most often in the form of an equity stake. Angel investors are able to provide financial support, either in the form of a one-time boost or ongoing investments. They can also help with various stages of business growth.
When reaching out to angel investors for working capital, you must have a clear pitch for the business and reasons why investing in the fund is essential for your business growth.
Angel investors used many organized forums to find investment opportunities. To get in touch with potential angel investors, you will need to submit your business plans to these forums.
Also Read: Installment Loans: What Are They?
Final Thoughts
All of the options mentioned above can be useful when you need working capital support. However, borrowing money from family and friends can also be an option. It should be done with caution and clear terms.
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Emem Umejuru
Tola Yimika
Owolabi Meshach
RBI
