There are a variety of ways to fund your business. The best method for you depends on your business needs, ability to adhere to the lending requirements, and what you’re willing to give up in exchange.
Debt financing options include loans and lines of credit. The eligibility criteria for each type of funding can vary widely and usually include revenue, credit scores, and time in business.
Know Your Needs
It’s no secret that running a business is costly. Often, there needs to be a way around the fact that you need money to buy equipment, cover payroll, or pay invoices while waiting for customer payments to come in.
The key is prioritizing your needs and deciding how much you can afford to spend on financing. You’ll also want to know what lenders look for when evaluating a loan application.
For example, online lenders will likely be your best choice if you need speed to get funds in hand and have a stellar credit score. They’re the quickest route to funding and can usually offer the funds within days of approval. Lenders like Mantis Funding also consider the time your business has been in operation; the longer, the better when securing funding.
Know Your Credit Score
Regardless of the type of funding you pursue, lenders like Mantis Funding LLC want to be sure that your business can repay debt and will do so consistently. That’s why it’s important to know your business credit score based on how you pay invoices and debt.
Payment history is a significant factor in your business credit score, and you can help improve it by adding accounts to your file, paying bills promptly (and even early), and not maxing out your credit lines.
Depending on the type of business funding you choose, there are specific documents you’ll need to submit. Having these documents prepared ahead of time will streamline the process and improve your odds of approval.
Collateral is an asset that secures financing, such as a vehicle, real estate, investment accounts, or cash. If you fail to repay your loan, the lender can take possession of that asset.
As a result, securing collateral financing can come with hefty fees and rates. It can also negatively impact your credit score since defaulting on a loan results in a blemish that stays on your report for seven years. For this reason, it’s important to make your payments on time. This way, you can avoid losing your assets to creditors.
Depending on your business structure, location, and other factors, taxes will impact which funding options are right for you. You may have to pay federal income, payroll, and local and state business taxes. Ensure you are familiar with the laws in your area and have all necessary documentation to meet these obligations.
Some funding types, such as venture capital and small business loans, will have high fees and interest rates. Others, like crowdfunding, may not require any fees at all.
When applying for business financing, be prepared to submit key documents such as your business financial statements, personal and business bank statements, and legal documents about your business. Having these documents compiled ahead of time can help expedite the application process.