Advice on Choosing the Best Financing Options for a Business [What You Need to Know]

business financing options

Starting, growing, or even maintaining a business can be difficult if you don’t have all the capital needed to finance daily operations. One of the most important components in running a successful business is having a financial plan in place that will cover any costs that may arise. This might include expenses like replacing old equipment, hiring seasonal staff, buying inventory, or purchasing property. So what is the best financial plan for you?

Getting Advice on Choosing the Best Financing Option for a Business

If you know where to turn for advice on choosing the best financing option for a business, you are on the right track. It may be a good idea to discuss your business needs with a trusted financial advisor, lender, or investor. Look for someone who has experience working with a company that is similar to yours in size or type and is willing to share their success strategies.
You may want to reach out to a lender that focuses primarily on financing businesses, such as Sunwise Capital, as they will be familiar with the details of various options. Check out the information below to get the basics of business financing options.

Debt vs. Equity

There are two types of financing options available to business owners, each with subcategories to choose from.

Equity Financing

With equity financing, you work with investors who will provide you with funding in exchange for owning a percentage of your business and receiving a portion of the profits. This type of funding works well if you don’t want to have payments and don’t mind sharing ownership of the business. It is also a great way to improve your business credit history.

Debt Financing

With debt financing, you will borrow money from a person or institution and pay them back in installments. There will typically be interest added and you may be required to put up collateral as a guarantee. This type of financing has a lot of great options to choose from, so it is not usually difficult to find one that will work for your situation. Plus, you won’t have to give up any portion of ownership.

Debt Financing Options

When you can’t find investors who meet your criteria, or you don’t want to give up a portion of your business, then investors are probably not your best option. In that case, debt financing options work best. See the list below for the different types of debt financing.

Business Loans

A business loan, or working capital loan, is a term-based loan with payment installments. This type of loan is often used to finance temporary or one-time needs like an expansion or equipment replacement, but it can be used for any business need. It is also commonly used by new businesses to cover the cost of running the business operations for up to a year.

Lines of Credit

A line of credit works in a manner similar to a credit card- with a maximum spending limit and the ability to use funds as needed. This is a great way to pay for smaller expenses like seasonal inventory, especially if you will be able to pay it off when the items sell.
A revolving line of credit will allow you to keep reusing funds as long as you do not owe the maximum borrowing amount. This is a great way to build up business credit with small purchases that are easily paid off, plus it won’t impact your personal credit.

Merchant Cash Advance

A merchant cash advance provides you with an upfront amount that is repaid based on your daily or weekly sales. If your sales are low, the payment will be low, and when sales are higher, the payment is higher. This may sound similar to using an investor since a percentage of your profits are going to someone else. However, with a merchant cash advance, you simply make payments until you reach the total borrowed, without sacrificing any ownership of your business.

Contact Sunwise Capital

For personalized advice on choosing the best financing option for a business, contact Sunwise Capital. Our goal is to provide business owners with the funding and financial knowledge needed to make wise budget choices and run a successful company. We look forward to answering your questions and helping you create a finance plan that meets your business needs.

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