Despite the way it is portrayed in the media, not all businesses are swimming in profits. The truth is, many businesses face an ongoing struggle to remain profitable. Some months are good, others are not so good. Even those that are consistently profitable may have very lean cash reserves. Then, when the economy cools and sales slow down, those cash reserves can quickly disappear. In order to remain in business these small businesses must be able to find and obtain additional business funding.
There are two types of funding that many small businesses consider when looking for business funding; conventional secured loans and unsecured loans. The type your business will qualify for largely depend on tow factors. How long your business has been operating, and the credit record of the business. In order to qualify for the best rates when getting business financing, you should have an existing business that can show a history of profitable performance, and have a clean credit history. Businesses that fall into this category can go to any bank that they have a relationship with, and the chances are good that you can get financing.
Unfortunately, some new businesses are not able to qualify for conventional loans through a bank. Depending on the business, it can be very expensive to get a new business to profitability. It is not unusual for a start up business to require additional financing in the early life of the business. Because the new business has not established a history, and many times they already carry a significant debt load, banks will refuse to give them the financing they require.
The good news is, there are lenders who work with businesses that do not qualify for financing through a bank. Working with these lenders, sometimes as little as three months of credit card transaction records is enough to qualify your business for financing with an unsecured loan.
With an unsecured loan, the lender will give you business financing in exchange for a certain percentage of your credit card sales. This percentage of your credit card sales will go to the lender until the total amount of the financing is repaid.
For secured and unsecured loans, the financing can be structured as a lump sum payment that is transferred to your account, or it can be set up as a line of credit where your business only withdraws the amount needed. If more financing is needed in the future, the remainder of the money is in the line of credit account. The business only pays interest on the amount that has been withdrawn from the account. As long as the line of credit is kept open the money is available to be withdrawn until the credit limit is reached. Once the funds that were borrowed are repaid, that money becomes available to be withdrawn again if needed at a future date.
Having access to business financing can be a saving factor in new businesses, businesses that may be struggling financially or businesses that are hoping to expand. It can mean the difference between reaching profitability and struggling financially.
