Are you in Atlanta and planning to start a small business? You’ll need to get the capital necessary to start, run, and grow your business. But small business financing can be tricky, especially for first-time business owners. That is precisely what we’re here for.

Many entrepreneurs start out using their own personal savings as well as business credit cards. However, there are many other types of business financing options that you can consider, all with their own pros and cons. This small business financing guide can help you choose the right one for your business.

The right financing will help you achieve your goals and propel your business to the next level. Here are some of the options available to any Atlanta small business owner who needs more working capital:

Debt Financing

There are a few ways you can use to get the money needed to launch and run your small business. One of the most common ways to funding your business is debt or credit financing.

Debt financing, as the name suggests, is a form of business financing where you borrow money from a bank or financial lenders and then repay with interest. There are many types of debt financing for small businesses. Here are some of them.

Short-Term Loans

Short-term loans are generally fast, easy to apply and don’t require any collateral. They are easier to qualify than the bank, SBA loans and medium-term loans. Also, unlike traditional loans, short-term loans are easy to budget and forecast.

Short-term loans will help ensure your business has continuous cash flow. However, you should note than short-term loans are smaller in terms of loan amount than the long-term loans. Also, as the name suggests, they are scheduled to be repaid in less than a year. Besides, they carry interest rates of 14% and up. Why are they so expensive?

Lenders need to protect themselves against the losses of investing in new business or businesses with lower credit scores. But don’t let that scare you. If you’ve established a good relationship with your business banking institution, you may be able to convince them to reduce the interest rate.

Medium Term Loans

Medium-term loans are usually bigger than short-term loans and come with longer-term lengths and lower interest rates. They are also more flexible than short-term loans.

If you have a great credit score, you can easily renegotiate loan’s duration, amount and interest rate. Receiving and successfully paying off a medium-term loan will also improve your credit score. They are, however, not as speedy as short-term loans, though you can be assured that you’ll receive your medium-term loan in a maximum of 10 days. Medium-term loans also have tough penalties.

SBA Loans

First things first: what’s an SBA loan? Simply put, this is a type of loan that is partially guaranteed by the U.S. Small Business Administration.

The Small Business Administration (SBA) doesn’t give loans directly to businesses. Instead, it works with financial institutions to provide loans to small businesses. SBA loans have generous term lengths and lower interest rate. To increase your chances of getting an SBA loan, make sure you do the following:

  • Build a better personal credit score. Your credit score should range from 300 to 800 (the higher, the better)
  • Have a good business plan
  • Know a lender’s minimum qualifications and requirements
  • Make sure you include all your financial and legal documents in your application
  • Provide collateral to back the loan

Small business loans are a great way to increase your working capital so you can expand your product selection, open a new location, or otherwise grow your small business.

Equipment Financing

This is a form of business financing that will provide your small business with the capital to purchase needed equipment. You don’t need any collateral to qualify for an equipment loan; the equipment purchased acts as the collateral for the loan. What’s more, after you repay your equipment loan, you own that machinery outright—as opposed to leasing, which is another alternative you can consider.

Invoice Factoring

This type of financing allows you to borrow money against the invoiced amounts due from your customers. It uses your outstanding invoices as collateral. Invoice financing or factoring will help you ensure continuous cash flow, pay salaries, and reinvest in operations and growth earlier than you would if you had to wait until your clients paid their balances in full.

Equity Financing

You can also finance your small business through equity. Here are three ways you can finance your business through equity financing.

  • Angel Investors: Angel investors are individuals who have the time and money to invest in small businesses. In exchange, they get equity. Equity means sharing your decision-making power. But remember, you are not only getting money from the angel investor — you are also receiving experience, resources, connections, time, expertise and energy.
  • Venture Capital: Working with a venture capital firm is much like working with an angel investor. The difference is that a venture capital firm is not an individual, but rather a company that is ready to fund your business. Not all small businesses can qualify for venture capital business financing. For a business to capture the attention of a venture capital firm, it must be innovative and disruptive.
  • Family and Friends: This is another common source of equity funding. It is simple: you go to your friends and family, tell them about your business, and convince them to invest in your business. In return, you can give them some equity. You should, however, be very careful if you go for this option. Make sure your family and friends understand what they are getting into before they invest. Also, ensure everything is written clearly with no ambiguity.

Financing a new business is not easy. In fact, it can be difficult and sometimes confusing. The information we have shared above will help you get financing and also help you know what type of financing is right for you and which one is not.

If you’re still wondering which types of small business financing might be right for your company, talk to one of our representatives. With a variety of loan programs — including various types of real estate loans — we are here to help your Atlanta small business grow.

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