Many business owners see the potential for growth in their company, but they lack the necessary capital. Thankfully, there are loan programs available to those with appropriate credit scores and business finances that will provide financing at a reasonable rate and term. Unfortunately, not every business owner or executive is aware of these growth capital loan programs. Therefore, it is necessary to discuss each available loan type and how it can benefit those seeking financing for expansion or growth in general.
If you are interested in low rates and fees along with longer-term lengths, then you may be interested in a conventional bank loan. While these loans are typically the most sought-after loans by businesses, only about 20 to 50% of applicants are approved. Therefore, it is necessary to have a good credit score and financials that demonstrate your business can service the requested debt.
For those seeking growth capital funding for business acquisitions or startups, then an SBA loan is perhaps a better option than a traditional loan. While conventional lenders are typically reluctant to approve loans to young startups because of the increased risk involved, an SBA loan is backed by the Small Business Administration, and they absorb the risk. Therefore, businesses without an adequate history may still be granted financing.
If you do not have adequate financials or a decent credit score, then an asset-based loan could be an option. These loans are dependent on collateral rather than finances. However, while this is a way to secure financing, these loans have higher rates and shorter terms than conventional and SBA loans.
Another way of securing growth capital financing is through an alternative lender. Alternative lenders do not require as stringent prerequisites of funding as traditional lenders. However, their term lengths can be significantly shorter. For instance, conventional loans can carry a 25-year term, while alternative lenders typically max out at five years.
If your business does not need significant funding, then you could try for a cash advance. These loans offer the fastest funding time and provide term lengths of up to 2 years. These loans are typically paid back through the prearranged sale of a portion of future receivables.
Growth capital loans are a great way to secure financing in the short term to help with future planning and development. While many business owners may only be aware of conventional loans, there are several other ways to finance growth.