Business Financing: What are Some of the Options Available?

Regardless of the current economic climate, most business owners would agree finding financial backing can be challenging.

Whether you are looking for money for expansion, for start-up funds, or just funding to tide you over, securing the needed financial help is not as straightforward as it seems.

For starters, you have to keep in mind that securing additional funding entails that you know more than just the latest SME loan interest rate or the likely funding sources that are available at your disposal.

Typically, you need to have all the key bases covered if you wish to get your hands on the financing option that will best fit your company’s current needs.

Below are some of the business loan options available at your disposal and all the essentials you need to know:

Factoring

In essence, factoring is a financing method where receivables are sold at a discount in exchange for upfront cash.

Factoring is often the ideal option for those who need to fill orders before getting paid.

Ideally, those who are considering selling their receivables, they will need to pay a fee that is at least a percentage of the total amount that will be borrowed.

Micro Loan

Even if you don’t have a credit history or a collateral, it will not follow that you won’t be able to get any funding help.

While micro loans often only involve a minimal amount, it also comes with a more flexible underwriting criteria and will require less documentation.

Micro loans are considered ideal for businesses experiencing a capital gap or start-up entrepreneurs looking to secure additional capital to purchase a new equipment or service a contract.

Lines of Credit

Most banks that offer bank loans also offer this kind of financing option.

For many, flexibility is one of this loan type’s most enticing features.

This business loan type is recommended for those who would like to spend money on a vital business expenditure or take advantage of a business opportunity.

A line of credit is also an effective way of separating business and personal purchases and keeping track of accounting.

Bank Loans

If your business has a robust credit history and a substantial cash flow, getting a bank loan is a lot easier.

Understandably, bank loans are considered beneficial since they have a much lower lending rate as opposed to other financing types.

For those who are considering taking this funding route, providing collateral and a detailed financial information is imperative.

And that’s just for starters.

Installment Loans

Installment loans are often repaid in equal monthly payments covering both the principal and the interest.

With installment loans, the interest rate is typically calculated from the date the contract is signed to the final day of the loan.

When monthly payments are not feasible, installment loans are paid quarterly, half-yearly, or yearly.

Balloon Loans

With balloon loans, the full amount of the loan is provided but only the interest is paid off within the loan’s life cycle.

A balloon payment of the principal will be paid on the loan’s final day.

In some cases, creditors will allow both the interest and the principal to be paid through a single balloon payment.

Balloon loans share some similarities with installment loans and are recommended when the business needs to wait for a particular date before payment of goods or services are received.

To ensure you secure the right funding fit for your needs, it is vital that all the essentials are taken into consideration.

Basics like loan payment terms, likely sources, SME loan interest rate, and other essentials should be taken into account, among other things.

Get expert help on the best financing option for your business needs by visiting www.capitalize.com.sg right now.