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Additional Funding for Your Small Business
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Business capital funding is the process of companies finding sources of monies to be used as working capital and to assist with the financing of long-term assets. There are a number of ways for a business of any size to find and secure funding and regardless of the source of funding. Each requires a serious investment of time and effort to follow through with the business capital funding application process. Depending on the needs of a company, a business can find capital funding from several sources. In order to choose the best option for a funding source, company owners need to be fully knowledgeable about each method of funding available.

Categories of Funding Sources

The variety of sources can be broken down into four distinct categories. Some sources of funding may not be right for each company and investigating the pros and cons of each source is recommended before applying for any type of financing. Too many inquiries into credit and too many open lines of credit can be damaging to financing efforts.

The four categories of business capital funding sources are as follows:

Basic Credit – Many businesses will use standard business credit to free up cash for operating costs. Business credit limits are often much higher than personal lines of credit. Businesses that do not require large amounts of working capital or funding for long-term assets can benefit greatly from using business credit as an additional source of funding. First, it helps to free up incoming cash flow for daily operational needs. Second, it helps to establish a strong business credit profile. In most cases, a personal guarantee is not needed, which is a great help to the smaller business entity.

Advanced Credit – Businesses who use this source for capital funding essentially are getting credit from other companies with which they do business. Unlike the credit card option, advance credit will require a credit check before extending a line of credit. The limits of extended credit are generally much larger than traditional credit card limits and the terms for repayment are typically longer as well. Financing the equipment and other supplies needed for day-to-day operations is also another way to free up actual cash necessary for other business needs.

Bank Lenders – For larger sources of funding beyond financing business equipment, bank financing is one of the most popular choices for a business. Bank financing involves much more of an application process than the previous two categories. Typically, a business credit check as well as a personal credit check on the owner will be conducted before approval. For smaller loan amounts, the business history and credit score is often sufficient but for companies seeking financing on a larger scale, more in-depth application processes will be necessary. The majority of banks will also require some sort of collateral prior to lending to smaller businesses. Additionally, most banks will require a solid, professional business plan as well as adequate amounts of financial information about the companies past and future outlooks.

Outside Investors –Going beyond bank financing, many companies will turn to outside investors in order to secure business capital funding. In the category of investors, there are also sub-categories of the different types of investors: venture capitalists, angel investors, and private investors.

Qualifying for Funding is a Job in Itself

The application and qualification process for the last two of the categories may seem to some companies as an overwhelming second job and find they are easily frustrated by the demands it entails. Investors and bank lenders will need to ensure they are not taking unnecessary risks by lending money to the “wrong” business. They want to be sure they will get a there money bank plus interest, especially investors who tend to invest very large sums of money into a company. Investors and banks alike will need to ascertain there will be a positive return on their investment. Businesses who are ill prepared to go through the application process will likely find funding to be impossible to receive. In addition to the lengthy background financial checks, there are also levels of proving the worth and longevity of a business. It could be months or more to receive the larger amounts of financing that go beyond standard credit cards and advanced extensions of credit.

Alternative Sources Available

While many businesses find adequate financing through the traditional methods for securing business capital funding, many others still need an alternative to tradition. One such company, MerchantCreditAdvance, was created to help small to medium businesses secure funding. MCA is a positive alternative to traditional loans from banks and lending institutions. Merchant Credit Advance provides advanced funding based on credit card sales and takes repayments based on a fixed percentage of credit card transactions. The money can be used in any business-related way and more can be “re-borrowed” after 90% of the original funding has been repaid. The services offered by MerchantCreditAdvance can aid those businesses that find they do not qualify or cannot pursue other sources of business capital funding.

To learn more about it’s services, contact an MCA financial specialist today!

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