Saturday, May 26, 2012

Start Up Business Financing Alternatives You Must Try Out

To successfully fund your start up business, we recommend that you employ one of the following alternatives:

- A business loan. This kind of loan is often considered the most traditional form of business financing. With it, you can look forward to receiving sufficient funds to finance a business requirement. In return, you will be asked to submit payments to your lender, on a monthly basis, until you can completely pay back the funds you borrowed, plus a reasonable interest charge.

However, you should remember that applications for traditional business loans often take as much as four months to receive approval. And so this might not be the best financing option for you, especially if you need a huge sum of cash to finance an urgent business need.

- A small business credit card. Did you know that there are credit cards especially designed to meet the needs and special requirements of business owners? They're called business credit cards. You can apply for one and use it for covering the bills and expenses you will incur, especially if you don't have enough cash to settle them, right away.

There are two basic types of business credit cards - secured and unsecured. To get a secured business credit card, you need to make a substantial deposit to your target card issuer. This initial cash-out serves two important purposes. First, it guarantees the repayment of your credit card charges, in case of default. Second, it determines the spending limit that will be imposed on your business card account.

An unsecured business credit card, on the other hand, does not come with a security deposit requirement. Instead, it carries strict credit score requirements and steep interest rates. Still, it is worth mentioning that such lines of credit come with much higher spending limits or caps as compared to their secured counterparts.

- An equipment lease. If your business has limited financial resources and you need expensive equipment, such as heavy machinery, vehicles or office furniture then, we encourage you to lease, instead of purchasing, them. Look for an equipment supplier nearby and arrange for a true lease. After all, with this option, you can receive the equipment you need without shelling out a significant percentage of your working capital. Moreover, you can use your business finances for covering more urgent startup costs you will soon incur.

- Invoice factoring. If you're in dire need of cash to settle your financial obligations and to keep up with your loan payments then, we suggest you sign up for invoice, or accounts receivable factoring. In this arrangement, you will submit some of your unpaid invoices to a factoring company, for cash. This will provide you with at most 80% of the sum of cash tied-up with your accounts receivable. The remaining 20% will be given to you by the factoring agency as soon as it receives complete payment from your customers.

Now, to avoid problems, we suggest you carefully select the invoices you will submit for factoring. Look for the receipts from your most reliable customers and file them with your chosen factoring agency. By doing so, your enterprise can avoid getting penalized for payment delinquency or default.

Copyright (c) 2013 Irish Taylor

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