A Discussion Of Small Business Financing Options

Small Businesses have been one of the main pillars of the U.S. economy. The small business is one of the greatest engines of the American economy. Unfortunately, it is also one of the first to be hit by economic circumstances that are beyond its control. Too often, small business owners blame their predicament on “the economy” when the simple answer is that it is within their control. Unfortunately, for these small companies to emerge from the economic downturn, and once again be an engine of American creativity, they must receive outside support. The Coronavirus Assistance, Relief and Economic Support (or CARES) Act has set up enormous opportunities for these businesses to get the resources and knowledge they need and may well be even more to come.

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A Discussion Of Small Business Financing Options

Small Businesses have been one of the main pillars of the U.S. economy. The small business is one of the greatest engines of the American economy. Unfortunately, it is also one of the first to be hit by economic circumstances that are beyond its control. Too often, small business owners blame their predicament on “the economy” when the simple answer is that it is within their control. Unfortunately, for these small companies to emerge from the economic downturn, and once again be an engine of American creativity, they must receive outside support. The Coronavirus Assistance, Relief and Economic Support (or CARES) Act has set up enormous opportunities for these businesses to get the resources and knowledge they need and may well be even more to come.

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For those who are not familiar with the acronym, the initials stand for: Economics, Human Resources, Trade Union, and Safety. When used in this context, the term “human resources” refers to those employees in a corporation whose services are critical to the productivity of the company. The acronym “traded union” refers to the relationship between the employees of a corporation and their unions, which represent them. The term “trade union” refers to any group of workers who are organized in a trade or industry and who participate in a common enterprise. The term “finance” refers to a profession with specialized knowledge of money management and banking.

Small business owners will find a wide range of professional services available to assist them in their quest for adequate financing. Private investors have been increasingly willing to provide small business owners with equity financing, which can amount to tens to even hundreds of thousands of dollars. Debt financing, which can also come in the form of home equity loans, personal loans, business loans, lines of credit, or auto financing, is another option available to small business owners. The advantage to using outside financing is the ability to obtain additional financing whenever an emergency or need arises, to small business owners may apply for only one time for debt financing.

There are two principles that small business owners must understand and embrace. The first principle is that debt is a necessary part of the business model. Without it, businesses would not exist. To illustrate this point, think about the automobile business. Sure, it makes sense to buy an automobile, pay monthly payments, make the vehicle payments on time and drive a safe and reliable vehicle, but if the car dealership doesn’t earn enough profit to cover the interest and other expenses, the car dealership won’t stay in business.

The second principle is that small businesses should avoid long-term debt. As an alternative to long-term loans, many small businesses seek short-term financing. For example, many small businesses obtain merchant cash advances. This type of financing is usually obtained through merchant credit card processing companies.

To better understand debt financing and the rules associated with it, business owners should research the Small Business Administration’s web site on equity financing. On the web site, small business owners should find a wealth of information about various methods of small business debt financing. The information provided includes criteria for qualifying for capitalization, repayment terms, fees, costs and other aspects of the process. A borrower can choose to use the services of a lender, broker or lender representative to arrange on-line small business debt financing. Each method of debt financing has its own advantages and disadvantages.

This finance article is to be used for informational purposes only. The information contained herein is not intended to be used in place of, or in conjunction with, professional financial or insurance advice relating to the acquisition of capital or debt or other types of lending programs. Prior to deciding to obtain any type of finance, the prospective borrower must consult with their own personal financial advisors or any other lender. The information contained herein is not intended to be used as, in place of or in conjunction with professional financial or insurance advice relating to the acquisition of debt or other types of lending programs. The information contained herein is not intended to be used as, in place of or in conjunction with professional financial or insurance advice relating to the acquisition of capital or debt for businesses.

Acquiring a mezzanine capital account is a vital part of many businesses’ growth plans. Merely having a business credit card may not be enough to finance a major capital purchase. Businesses are encouraged to obtain a variety of forms of business financing that are available through banks, lenders and other sources such as venture capitalists and equity financing companies. Businesses should explore all means available to them in order to obtain the debt financing they require in order to grow and expand their businesses. To learn more about small business finance, check out our other articles by this author.

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