Is your New Year’s resolution to stop putting off those long-overdue projects that will improve your business? Have you finally decided to renovate, expand, hire new employees or purchase new equipment? Well, one of the first steps in taking on that project will be finding the best financing option. Knowing what small business funding options are out there will help you make the right decision. Here’s a short guide for everything you should know.
Funding Options for Businesses:
Banks: Bank loans offer the lowest interest rates and the longest terms. However, those loans are also the hardest to get. If you are just beginning your New Year’s project now, prepare yourself to be waiting many months before the funds actually end up in your bank account. Banks require large amounts of paperwork, and their manual credit review process can take 2 to 5 months. Also, prepare to be turned away. If you have good credit, can offer high-quality collateral, can produce the necessary documentation and are looking for a larger loan, that process might be worth your wait. But if your business doesn’t have one—or all—of those things, and you are looking for a loan of under $1 million, you might have trouble obtaining it.
Banks are not well equipped to address the needs of small businesses. Many of the loans are too small, relative to their cost of origination—so the banks do not produce any significant profit and therefore do not serve small businesses. They tend to loan against quality collateral such as real estate to offset the risk of the loan, and they require close to perfect credit.
Cash Advance and Merchant Cash Advance: These products should be used only when absolutely necessary, as they can be very harmful to your business. If you are looking to make longer-term investments in your business, such as the improvements listed above, you should avoid cash advance and merchant cash advance to pay for these projects. Merchant cash advance lenders collect a fixed daily percentage from their customers’ credit card sales until the loan is paid back in full. Cash advance loans are not real loans but payment contracts where fixed payments are debited from the borrower’s account daily. Both these daily pay products have high interest rates and do not allow businesses to start investing the money before they have to begin paying it back. They tend to put a lot of pressure on a business’s cash flow. Of all the funding options for small businesses, this one should fall at the bottom of your list.
Fundation Small Business Loans: Fundation offers small business loans that enable you to make long-awaited improvements in your business, without waiting for funds and without putting pressure on your cash flow. With affordable interest rates, and terms of up to 4 years, Fundation’s non-bank loans will enable you to start investing in renovations, new locations and new employees, or even start the year off with a better solution for managing your cash flow. Our payments are debited from your account only twice a month. From finalized small business loan application to funding can take as little as 3 days, so that you can start making these improvements right away.
Are you specifically looking for funding options for business equipment? No matter what business you’re in, having the most up-to-date equipment can help set your practice or business apart from the rest. But your options for small business equipment financing are slightly different from those for other loans.
When looking to purchase a new piece of equipment, you can either lease the equipment or finance the equipment. This is the same basic concept as leasing or buying a car. If you decide to finance your equipment purchase, the bank will put a lien on the piece of equipment as collateral. If you decide to lease the equipment, the bank will not need to put a lien on the equipment because it will technically own it. However, most banks structure leases as capital leases, so you will have the ability to buy the asset back for a nominal price at the end of the term. For both funding options, the loans are directly based off the equipment that you plan on purchasing, and the terms are tied to the useful life of the equipment. While you can turn to a bank to help you get the equipment you need, a number of specialty equipment leasing and alternative business financing companies also fill this space.
Fundation offers equipment financing loans that are structured to help restaurants, auto repair shops, doctors’ and dentists’ offices, and other small businesses make significant investments in equipment that will put their businesses ahead of the rest.
The information contained on this page is for general informational purposes only. It is not legal advice and should not be relied upon in making borrowing decisions. Fundation loans are subject to lender approval.
Fundation combines the benefits of a bank loan with the ease and efficiency of an online lender. We offer conventional loans with competitive rates to businesses with varying credit profiles. Our technology allows us to deliver capital in as few as 3 business days through streamlining the collection and evaluation of customer information and conducting the majority of the lending process electronically. As a direct lender, we use our own capital to originate and hold the loans we make, so that we can focus on building relationships with our customers. Our dedicated customer relationship model enables us to understand each unique borrower’s business. This level of service, coupled with our best-in-class products, is why many of our customers come back to us repeatedly for more capital.