Every business of every size in every industry needs capital to operate, thrive, and grow. Most business entities will need business financing at some point to meet their needs. According to Forbes, 43% of small businesses applied for a traditional loan in 2019. That percentage decreased to 37% in 2020 and declined again in 2021 to 34%. While the need for business financing has undoubtedly not changed, it is apparent that many businesses have found other means of securing their needed funds including alternative funding solutions. 

Reasons to Seek Business Financing 

The reasons to seek business financing start with the common need to address the everyday costs of ongoing operations including being able to address seasonal business fluctuations. Additional financing needs include getting the capital to acquire or upgrade equipment and machinery, purchase inventory, refinance debt, recruit and train staff, ramp up marketing, expand product or service offerings, and simply remain competitive. Significant business financing may be required to start a business, buy a franchise, acquire another business, or expand an existing business. 

Types of Business Financing 

Business financing is generally regarded as being able to use someone else’s money to start, sustain, and build a business.  

The types or sources of business financing include: 

Bank loan. This is often thought of as the first choice for getting a loan, even though getting a bank loan can take longer and be more difficult than other financing sources.  

SBA loan. The Small Business Administration (SBA) develops partnerships with lenders to partially guarantee loans for small businesses. Generally, the rates and terms of SBA loans are more favorable than bank loans and there are various types of SBA loans available. 

Invoice factoring. Invoice factoring allows a company to convert its outstanding invoices into funds that are immediately available. Using this approach, invoices are sold to a third party at a discounted rate. The third-party factoring company collects the invoiced funds from your customers and charges a fee for doing so. 

Invoice financing is simply a loan based on the value of a company’s outstanding invoices. 

Merchant cash advance. If a business has a high volume of credit card transactions, it can get a merchant cash advance on those transactions. Rather than being a loan, a merchant cash advance is essentially a purchase of your future receivables. 

Equipment loan. An equipment loan can be secured to acquire many types of equipment, including office furniture, computers, tools, and machinery. The equipment itself serves as collateral for the loan. 

Inventory financing. If your business has a significant amount of inventory on hand the inventory can be used to secure other needed capital. 

Franchise financing. A franchise loan can be secured to acquire the significant amount of funds needed to start a franchise. 

Real estate financing. Approaches can be used to finance real estate purchases. 

Alternative lenders can provide many of these types of loans, often with less application hassle and with more favorable interest rates and terms. 

Another major source of business financing is equity financing where a business owner essentially trades a portion of business ownership for financing from a partner instead of a lender. 

5 Reasons Business Financing is a Good Choice 

Business financing is a good choice because borrowers can: 

  1. Select the type of financing to suit their needs and company goals. 
  2. Select the amount of financing that meets their needs. 
  3. Select the type of access to funds that will best meet their funding circumstances. 
  4. Choose the terms and interest rates that they can afford. 
  5. Choose repayment options that are convenient and flexible to their business needs.

Get Expert Alternative Financing Assistance 

Contact Multiple Financial Solutions, with offices in Jacksonville, FL, and Houston, TX. We offer a portfolio of alternative funding solutions for companies that can’t get funding from banks including business lines of credit, merchant cash advances, and commercial real estate funding. We focus on businesses that have been active for 2+ years and are looking to grow to the next level. If you are facing a funding deficit, we are ready to help you.