Borrowing to Build Your Business
When borrowing money to build your business there are a number of different options. Each option has pro's and con's -- and each option may be of value to your business.
Let's take a look at options available when borrowing to build your business:
(1) Cash Flow: Well, not really "borrowing" from cash flows -- but, using positive cash flows to re-invest in your business. In this scenario, business owners elect to re-invest profits back into the business to achieve business growth. This can be a good option for businesses at stages where cash flows are positive and owners are financially able to make additional investments in the firm.
(2) Owner Investments and or Friends and Family: Owners also invest more into their businesses to build growth or look to the close knit relationships of family and friends. Owners may also consider taking on additional partners for the purpose of bringing in additional capital and capacity to the business.
(3) Trade Credit: Some vendors may offer terms like "net 30" or "net 60" to give you extra time to pay. This can be especially helpful for seasonal businesses, younger businesses and businesses experiencing a spike in growth or opportunity. If you have not established trade terms with your suppliers, you may want to seek these terms now -- before your need the extra time. Plan ahead and ask for terms now.
(4) Business Credit Cards: Credit cards can provide a quick fix for smaller, short-term needs. Just be careful because fees can be high, the credit may be revolving (rather than term), you have a limited time to repay, and failure to pay on time may impact your credit scores.
(5) Equipment Lease: Many assets can be secured through lease including copiers, production equipment and computers. Leasing equipment can help moderate business cash flows, help with financial issues derived from business expansion and when the item may require regular upgrade.
(6) Term Loans: Term loans may be secured for a number of reasons including restructuring and lowering the cost of existing debt (like credit cards),acquiring equipment, expansion, buying out a partner, purchasing merchandise, and more. The online credit marketplace available through WomensBusinessLoans.org (powered by Lending Club) is an example of a term loan lender.