5 Tips to Acquire Working Capital for Small Businesses

As a small business owner, you have more options today, than you ever had in the past when it comes to borrowing working capital.

It can be difficult to find the right option for you business, even though there are many options. You can find out about all the options available for working capital. It will make it easier to make informed decisions about growing your business.

1. An SBA Loan

This type of loan is perfect for long-term working capital investment. The loan is also long-term and is suitable for business owners with a good credit rating who have been in business at least 2 years. The rates for loans from the Small Business Administration are very affordable. The SBA will guarantee any loans that were issued by a bank, even though it is not the actual lender. This guarantee reduces the risk for the lender and will allow you to access terms that are more favorable than if the loan was not issued by the SBA.

2. Online Loans for Shorter Terms

This loan is great if you have a temporary financial need such as the need for inventory or supplies to buy. A loan of this nature is available to any business that has been in business for less than 12 month. A business must have an annual revenue of at least $50,000 and a credit score of at least 500.

If you don’t meet the qualifications for an SBA backed loan, then this may be a viable option. These loans are easier to qualify for and don’t have as stringent requirements. They are fast and convenient, but come at higher prices. Annual interest rates can range from 20 to 80 percent. These loans can be repaid in three to three years.

3. Invoice Factoring

This loan can cover any business expense you have while waiting for payment from clients or customers. This funding option is ideal for B2B businesses that have cash flow problems due to slow invoice payments.

Cash flow problems are the most common reason a business goes under. Invoice factoring can solve these problems and business owners don’t have to wait up to 90 days for the payment. For invoices over 30 days, the rates start at 2.5 percent.

4. Crowdfunding

For expanding your startup, crowdfunding is an ideal way to raise money. This option is ideal for entrepreneurs who are still at the beginning stages of their new business. These options are best for established businesses. Startups are often in a disadvantage when it comes down to starting a business. Because there is no track record that can easily be checked, this is why. There are many options for crowdfunding, so ensure you do your research before making a decision.

5. A Peer 2 Peer Loan

This is an excellent option if you have urgent working capital requirements. This loan is ideal for businesses with good credit who only need a small amount of capital. Because many investors contribute small amounts of money to your business’ growth, these loans are similar to crowdfunding.

These options are available to you if you are looking at working capital options. When you do this, you will get the funds that you need and don’t have to worry about running short on money.

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