Small business owners who need capital to start, build, or grow their companies have access to a diverse range of financing sources.
It’s important to do your research before choosing between crowdfunding or obtaining funding from family and friends, or deciding if an angel investor, bank loan, line of credit, or asset-based loan is your best funding option. At Summit Financial Resources, we know that understanding the basics of small business financing is essential to making sound choices that will fuel your company’s success.
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Angel Investors and Venture Capital
Angel investors have helped many big-name companies get their start, including Google, Yahoo and Costco. Angels are typically high net worth individuals and savvy investors who exchange their capital for an ownership interest in a newly formed business (think Shark Tank). As successful former business owners, they can provide a tactical benefit to your company by offering experience, guidance, and valuable business contacts as well as financial support.
For small businesses that are beyond the startup phase and have revenues coming in, a venture capital investment may be more beneficial than an angel. Venture capital companies differ from angel investors in that they invest other people’s money in businesses with high growth potential. They get their return in the same way as angel investors, but they usually want a large ownership share as well as a say in the management and direction of the business.
Although getting venture capital can be difficult, this type of financing works well if you are having trouble qualifying for a loan. A venture capital company is interested in your long-term potential, not your current creditworthiness. However, they often look to recover their investment within three to five years, and are not likely to be interested if it will take longer than that to bring your product to market.
Partnerships
A good business partnership has numerous benefits, ranging from instant access to a new customer base to providing more working capital and expanding your borrowing capacity. However, many business owners have learned the hard way that the wrong partnership can lead to friction, resentment, and the loss of valuable time and resources. If you decide to dissolve the relationship, it can be complicated and costly, much like contentious divorce.
When considering forming a partnership, it’s critical that you and your partner agree on being invested in running the business and contributing essential work. Be sure the other partner also aligns well with your company culture and personal management style. Your partnership success can hinge on this compatibility, which will make your customers happy and help drive profit and expansion.
Small Business Grants
Looking for free money to help grow your business? Small business grants are non-repayable funds given to companies that meet the qualifications established by a government organization, a non-profit, or another company. When you find a grant your company is eligible for, submitting a thorough and compelling application is crucial. Grants are highly sought-after and the competition can be fierce.
The U.S. government allocates billions of dollars of grant money to businesses each year, including specific grants for businesses owned by women, minorities, veterans, and Native Americans. Small businesses may be eligible for grants that help state or local governments meet certain objectives, such as revitalizing a part of town or saving water during a drought. In addition, businesses and non-profits often sponsor grants as part of their charitable giving and community outreach efforts.
Bank Loans
There are countless debt-financing options available for small business owners. Bank loans are the most traditional source of financing. They are convenient, straightforward, and charge a moderate interest rate. Bank loans are also fairly easy to apply for and pay back.
However, these loans have strict qualification standards that disqualify many small businesses during their first few years of operation. Some banks have become reluctant to offer long-term loans to smaller companies because of the risk involved. The application process can also take several months, and if you’re in a short-term cash crunch, you might not have the time to wait.
Working Capital Financing
Summit Financial Resources occupies the middle ground between easy, but expensive financing and lower-cost, harder-to-get loans. We offer working capital loans for small to medium-sized businesses that involve using your accounts receivable and other assets as collateral. We can mix and match from a variety of product options to suit your needs, including invoice factoring, asset-based lending, inventory lending, and equipment financing.
Because Summit Financial Resources is not regulated like a bank, we can structure more flexible deals, take more risks, and make funding decisions quickly. We partner with our clients to reach their business goals, creating custom financing solutions with reasonable rates and structures that banks and other commercial finance sources cannot provide.
Whether you are just starting out or on the fast track to growth, Summit Financial Resources can provide unique funding solutions that are right for your business.
Working Capital financing is a few clicks away.
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Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.