Capital and the method of acquiring it is one of the essential things for running a successful business. Often things boil down to choosing the right method for that particular business. There are many methods of financing a brick and mortar store, but the points below illustrate the five best ways amongst them-
- Bootstrapping- It is the method by which the owner finances his/her own business with the help of savings and other sources. This is done mainly when the rates of interest for borrowing is high, and the returns on the venture are low. One of the key advantages is there are no risks associated with this method.
- SBA Loans- SBA Loans are a bit stringent but ideal for companies looking to expand.
Some of the requirements for getting this type of loans are-
- Person owning the business to have a credit score of at least 680
- Often putting 20-30% as down payment
- Need to be in a revenue-generating business for two years or more
- Sometimes significant domain expertise is also needed
They are very flexible and are worth the effort of getting one because they areextremelyflexible. Extended payment periods, no balloon payments, are some of the features that these loans provide. In many cases, the period for paying may extend to 25 years.
- Alternative Lenders- Alternative lenders are a good option to cover the working capital for a business as they are quite flexible allowing their borrowers to pay back the amount between 1 to 36 months. The downside as expected would be the high APR charged on these short-term loans. There are some rules for applying for these loans, but they are a lot easier than the SBA loans.
- Hard Money lenders- Hard money lenders provide loans at a much lower interest than alternative lenders. Although some require individuals to have a high credit score, most of them clear loans in a period of 2-4 weeks.
- Friends and family- This is also another option to finance the business. Since friends and family would not take very high-interest rates and might also be forgiving if there is some delay in amount makes it perfect for many businessmen. But on the other hand, relationship and friendship can become strained if the money is not returned wholly. Another mistake while borrowing money is not to have a solid business plan to pitch to friends/family. Provided one has a solid plan and backs it with some kind of modest collateral; this option is one of the very best here.