How to Finance a Small Business Purchase
Small businesses have several different options when it comes to financing small business purchases. The types of financing a business is qualified for will depend on several different factors including how long the business has been in operation, the annual revenue of the business, how much debt liability the business has, the credit score associated with the business and what the financing is going to be used for. Small businesses will typically have access to four different types of financing. These include: lines of credit, loans, SBA financing and credit cards.
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Use a credit card to finance your purchase. Credit cards are a great way to make a purchase upfront and pay for it over time in monthly installments. Credit cards are an excellent option for small businesses because the criteria for obtaining a credit card is much lower than it is in getting other lines of credit such as loans. This makes using a credit card ideal for businesses just starting out as they try and build their credit or for businesses trying to reestablish their credit after some set-backs. If your business doesn't already have a credit card, you can apply for one at your bank or with any national card lender. Some major credit card issuers for small businesses are Capital One, American Express and Citibank, just to name a few.
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Open a line of credit at your bank and use it to finance your purchase. Banks offer these lines of credit to businesses to use whenever they need them. They're great for short-term borrowing and whenever immediate funds are needed. Another plus is they have flexible repayment terms. When you open a line of credit at your bank, the bank will approve you up to a certain amount. That amount will then always be available to you whenever you ask for it. You can get a line of credit by going to your bank and filling out an application.
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Apply for a loan from your bank to finance your purchase. Small business loans will typically need to be backed with some type of collateral so not every type of purchase will qualify. These loans are best used for purchases such as building expansions, new equipment and new facilities. You can apply for a loan by going to your bank and filling out an application.
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Apply for SBA financing from your bank to finance your purchase. SBA loans are government backed loans that are offered to businesses that typically wouldn't qualify for traditional small business loans. Their major benefits include lower down payments and longer repayment programs. To apply for an SBA loan, go to your bank and fill out an application.
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References
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