Finance is the backbone of any business. A business needs capital to support day to day activities. It needs funds to promote its products, to purchase the equipments, pay to their employees, creditors. In fact every business activity requires money.
The finance for small business is available in the form of short term loans, medium term and long term loans. The small business can also raise funds from accounts receivable financing and business line of credit. Payday loans and personal loans are also a good option to raise short term fund to support the working capital needs. Let's discuss them one by one.
Payday loans
These loans are one of the best ways to raise funds to meet immediate needs of the business. If you own a small business then you can apply for the payday loan. For this you sign a post dated cheque of the amount that you borrow.
The loan amount is credited to your account. The best thing about such loans is that the processing is fast. The loans are sanctioned without any delays. Moreover the financial company is not concerned with the way you use the money. But the bad thing is that the immediate funds come with high rate of interest. You are also liable to pay the penalty in the form of high interest rates in case you are not able to pay your amount on time.
Term loans
These loans are available for different terms. Loans for more than one year are the medium term loans. Loans taken for more than five years are the long term loans and loans which you have to pay off within a year are the short term loans.
You can apply for long term loans if you need funds to expand your business. This is the better way to raise funds to buy an equipment or plant for your business. Such loans are available as secured and unsecured loans. Leasing is also an option which should be considered. The interest on this loan is tax deductible and the repayment is spread over the years which make the term loan a good option for raising funds.
Account receivable financing
This is also known as factoring or invoice financing. This forms an alternative source of finance. The business account receivable form the current asset for a business. If your business needs immediate cash and you have invoices that will realize after 30 to 60 days then you can approach the factoring company, sell them your account receivables for a fee and take the amount.
Besides these forms, government grants and credit unions can also provide you with the necessary funds so that you carry on your business smoothly.
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