5 Financing Strategies to Launch or Expand Your Business

financingWhether you are trying to get a new business up and running, or you’ve been established for years, there comes a time when you will probably need additional capital to achieve your business goals.  However, finding the right financing for your business takes some research.  The type of financing you need is based on a number of factors.  You need to examine how much money you need, what you need to finance, how long you need to repay it and what your credit looks like.  Based on your answers, these are a few of the more common financing options to look into.

Traditional Bank Loan

Banks are usually a good place to start when looking for financing for your business.  Bank loans usually offer attractive rates and repayment terms, and you can get one lump sum upon closing to use for your business.  However, while the loan programs may be the most attractive, they are often reserved for established businesses with strong credit.  New businesses may find it more difficult to qualify for a bank loan, but it’s still worth it to try, if simply to gain valuable insight into the process.

SBA Loan

Businesses that cannot meet the qualifications of a traditional bank loan should consider an SBA loan.  The U.S. Small Business Administration (SBA) helps small businesses get loans by providing traditional lenders with a federal guarantee on your loan.  The SBA doesn’t actually provide the money, but they reduce the risk to the lender and make it easier for them to access capital.  In turn, this helps the small business get the money they need, typically with rates and fees that are comparable to non-guaranteed loans.

Venture Capital from Investors

Venture capital is private funding, and offers another alternative to typical bank or SBA loans.  Unlike bank financing, in which you repay a loan, venture capital firms usually invest in startups in exchange for equity, or partial ownership, in the company.  If a VC firm sees excellent potential for fast growth with your company, they might offer not only financing, but also valuable mentoring and professional development opportunities.  This could be worth the trade-off of giving up some equity, depending on your goals for your business.

Small Business Grants

The best kind of financing is free financing.  Some small businesses are eligible for grant money that doesn’t need to be paid back if they meet certain criteria, such as minority-, women- or veteran-owned businesses, or certain businesses that have been affected by the COVID-19 crisis.  They are typically offered through private companies, non-profits or government organizations and they usually require perseverance to find and apply for one.  But doing the work can certainly pay off in the end.

Friends and Family

If borrowing money from friends or family is an option, it is something to consider, as you probably would be able to get better terms than from a traditional loan. Close relatives, like parents or grandparents, may even be willing to loan you money interest-free for a time.  But you need to keep in mind what could happen if things don’t go as planned and you have trouble paying them back.  It might not be worth the risk of damaging a personal relationship, so this option is a harder choice than you might think.  If anything, it is wise to put the terms in writing, just to make all parties more comfortable with the arrangements.

Whichever financing option you decide is right for your business, working with a qualified attorney can give you a strong advantage.  The application process is not always easy, and properly preparing beforehand can increase your chances of receiving the money you need.  At Churchill, Quinn, Richtman & Hamilton, Ltd our attorneys have decades of experience in business law and can explain the legal implications of the various financing options, as well as represent your business throughout the process.  Our goal is to help ensure you receive the best financing terms according to the specific needs of your business and that your business is legally protected.  Additionally, we can also be a reliable advisor and offer valuable legal guidance to support you in achieving your business goals for the lifetime of your business.  Contact us at 847-223-1500 for more information.