The good news is that you do not have to go the “bank or bust” route and you do not need to spend a huge amount of time figuring out what works best for your current business needs. Service providers, like FundingHub, make it their mission to match lenders and their various products to qualifying applicants.
In this previous article we shed a little light on the availability of “alternative lenders” as well as products such as term loans, secured or unsecured loans, invoice discounting, factoring, purchase order finance, merchant cash advances, asset finance, asset rentals, line of credit, trade finance etc.
A mouthful, we know but, generally, all of these answer a need that falls into one of the following four loan requirement categories.
Why do you need a loan? What is the desired impact? How much will you need and for how long? Like most other aspects of running a successful business, understanding the “why” behind your decision will go some way to shielding you from biting off more than you have to chew.
What is the purpose of your intended loan?
Expansion, renovations, equipment or inventory purchases – you are looking to take one giant leap into the future and you are looking for funds to make it happen? Secured and unsecured loans are just two of your options, with secured loans, obviously, offering more attractive interest rates than its risk-friendly cousin in the unsecured space.
Some loans are especially useful to provide a safety net, that peace of mind of knowing that you have access to finance to cover the unexpected and/or day-to-day activities. With economic climates as they are and client cash flow challenges potentially causing ripples in your own business, having a line of credit, overdraft or debtor finance available is a great way to safeguard your business.
Often geared towards a specific piece of equipment or asset that will help increase efficiencies e.g. “a new delivery vehicle”, the types of loans that answer this need generally take the new asset as security for the loan, negating the need for additional collateral from your side.
You may have a requirement for access to cash ahead of an actual need arising. Pre-funding a speculative trip abroad to view (and perhaps purchase) new technology and / or products, for example. Both debtor finance and cash advance loan types are fit-for-purpose in this instance. Where cash advance provides funds based on your monthly sales, debtor finance gives you access to money based on your account receivable.
Purpose is power
There are plenty of factors to consider when applying for a business loan but, certainly, the purpose of the loan is front and center.
We all have different circumstances and requirements.
This necessitates we look beyond “one size fits all” type of finance solutions to offerings that are more flexible, innovative and closely matched to our specific needs.
If you’ve been trading for a minimum of 12 months and have an annual turnover exceeding R1 million we encourage you to consider Funding Hub’s quick fire online application process.