How to Get the Business Capital You Need to Launch and Grow Your Business
Capital is the money a business has available to fund operations and expand for the future. All businesses require some level of capital to make a profit and stay afloat.
Capital can be physical assets, such as machinery or raw materials, or financial securities like stocks and bonds. It can also be intangible factors, such as human and natural capital.
Startup Business Loans
A startup business loan is a type of financing available to businesses that don’t have an established track record or credit history. Qualification requirements, application processes and available loan amounts vary among lenders.
Several alternative small-business funding options are also available for startups, such as crowdfunding, personal loans and merchant cash advances. These financing options may be more difficult to access than traditional bank loans, but they could help you start your business on a solid footing and establish better credit in the future.
Before applying for a business loan, create a detailed and updated business plan. This will help you demonstrate your business’s potential to generate revenue, and it can also help you convince a lender that you’ll be able to pay back the money.
There’s no shortage of ways for startup companies to get the capital they need to launch and grow. These options range from traditional bank loans to business credit cards.
Before you decide on a funding method, make sure you know your business well and have a sound plan in place for success. Gather all of your financials (business and personal tax returns, bank statements, profit and loss statement) to give investors an idea of how much money you’re bringing in and how much you need.
Once you’ve identified your financing needs, it’s time to start the fundraising process. This can take months, depending on the level of competition and your company’s valuation.
Venture capitalists often offer funding to high-potential startups in exchange for equity. These investors may be individuals, such as angel investors, or private equity firms that invest in startups based on their potential to generate return on investment.
Business Lines of Credit
Business lines of credit are a flexible way to receive capital. They work like credit cards, but they allow you to withdraw funds as needed and only pay interest on the amount you borrow.
They’re ideal for sudden expenses, cash flow gaps and major purchases. Plus, they help strengthen your business’s credit history and could lead to better financing options down the road.
Secured business lines of credit require collateral (like real estate or equipment) but usually have lower interest rates and higher spending limits than unsecured lines. Some lenders may require a personal guarantee or put a lien on your assets.
Most businesses need to be in business for at least six months and have a good business plan to qualify for a line of credit from a bank. They’ll also need to provide financial statements and other documents that demonstrate your annual revenue and financial stability.
Business Term Loans
Business term loans are a great way to fund big investments or purchases that will boost your business. With long repayment periods and lower interest rates than credit cards, these loans give you plenty of time to generate a return on your investment before you have to pay them back.
Whether you’re expanding, buying a new location or covering inventory costs, business term loans can help you make those big investments possible. But, it’s important to understand your business’s cash flow to determine if a term loan is the right funding option for you.
Term loans are available in different lengths, from short-term loans with repayments of one year to medium-term loans with payments over three to five years. Typically, these term loans are secured by business assets like equipment or real estate.