Every small business’s dream is to grow, reach more customers, and scale its services. But all would all remain fantasies without proper funding from the right sources. You may also want to put many things into consideration now that you’ve moved past your business’ startup phase, including the cost of living, paying personal and business rent, purchasing inventories and business equipment, all these in addition to running the business daily.
Some of the things you may want to bear in mind are choosing the right source—traditional like banks or online such as Camino Financial—for raising funds for your business. The purpose of raising funds and how much you need—small business loans, venture capital, or big loans. Fortunately, there are many options to raise funds for your business, and in this article, we’ll highlight some of them that could be beneficial in your business expansion quest.
Traditional Vs. Online Lenders for Obtaining Funds
There are two basic ways to get financing for your small business expansion—traditional and online methods. It’s either you are using a conventional financing method or the online lending method. Here’s a brief dive into their details.
Traditional Lenders
The traditional loan or lending method has been existing since ancient times. You may wonder, what old-time? Well, since the concept of buying and selling goods and services began, until now, borrowing and lending have been the primary source of funding for scaling businesses.
Obtaining financing was done primarily for running a business and purchasing equipment, more workforce, or expanding the business and its services through small business loans or equity financing.
Traditional financing methods include:
- Debt Financing (Bank and Mortgages): Banks have offered loans to many small businesses. The kind of loans they offer includes line-of-credit loans, secured or unsecured loans, interim loans, installment loans, and so on. However, business owners must consider the bank’s interest rate, expiration period, loan advancement option, business capacity, and more before opting to borrow from banks or risk venturing into future problems that may hinder their business progress.
- Equity Lenders (Venture Capitalists and Angel Investors): Business owners looking to break limits or protocols resort to venture capitalists and angel investors. However, it is not as easy as it may sound. The bar for getting VC loans is so high that entrepreneurs must prepare for the worst, including selling part of their business shares to the venture capitalist. Fortunately, VC loans are better than banks because the risk of losing everything you have is less if the business eventually goes sour.
Online Lenders
The online financing method became popular with the rise of digitization. So many businesses are moving to online marketplaces through eCommerce, digital solutions, and so forth. Online financing platforms make it easier, faster, and cheaper for small businesses to get loans instead of going through draconian processes like the traditional financing method.
Small and medium enterprises (SMEs) can obtain business loans by booking a quote or directly applying on the platform after completing KYC. The good thing about online financing methods is their low-interest rates and multiple payment options, including banks and credit cards.
With online financing options, SMEs can get instant some business loans at their convenience. There is a loan calculator to help you make informed decisions on the adequate loan you may need to grow your business and know the associated interest rate for the loan.
Other Ways to Get Funding For Your Business Expansion
- Financing from Family and Friends: Usually, family and friends are a primary option for every small business owner to obtain loans. However, not all small business owners have friends or family members rich enough to finance their business or enough capacity to provide funds to expand. In this case, they resort to another primary traditional financing method—the bank.
- Small business administrations (SBA) loans: SBA empowers small businesses with small business loans by providing grounds and connections from local lending institutions, including banks, to help users raise the loans they need. Before submitting loans through SBA, users must ensure they have convincing portfolios and the capacity to repay loans while running their businesses.
- Personal Financing: By now, your business should have saved up funds for running it daily. Personal financing includes internally-generated funds from business accounts, insurances, individual retirement accounts (IRA), personal line of credits, etc. However, if obtaining funds from this method is not possible, users resort to the following option: family and friends.
Conclusion
Getting loans to start your business can be challenging, but getting loans to expand it shouldn’t bother you once you are on course. While traditional financing methods like banks and venture capital firms may look like better options, inside them lies many disadvantages like high-interest rates and chances of losing your business if you fail to fulfill their requirements.
Fortunately, online options like Camino Financial limit these requirements and ensure you get desired loans quickly and easily at cheaper interest rates and a simple KYC verification process. That said, you may want to try out an online financing method the next time you intend to obtain a small business loan.
