Small business funding demystified.
It doesn’t matter what is holding back your business's growth. The real question is, what are you doing about it? The good news is that there are lots of options out there.
There is a laundry list of small business financing options out there that will help solve the challenges of funding growth. Some provide instant relief, others require tedious paperwork and a personal guarantee, credit check, and more. If you’ve been researching the choices, you probably have seen them all: invoice factoring, accounts receivable financing, working capital financing, marketplace lending, term loans, lines of credit, small business loan alternatives, even some industry-specific loans.
Even though you're looking for funding for your small business, a lot of financial products rely on your personal credit to approve you, and to penalize you by reporting issues back to the credit bureaus if you don't pay them back on time. This includes products like lines of credit, invoice factoring, and term loans.
Some options, like invoice factoring, give you money up front for unpaid invoices, but then require your customers to pay them back directly—not you. Some small businesses don’t mind someone else making contact with their customers, but others don’t want a third party interfering with their customer relationships because it could lead to an uncomfortable conversation with the customer.
This might sound like a good problem to have, but think about it this way: if you get a huge term loan for more money than you need, you still will have to pay interest on the entire amount, not just what you use. That can add up to a lot of unnecessary interest payments.
Keep an eye out for things like origination fees, subscription fees, maintenance fees, and prepayment penalties. These fees are often tacked on in addition to the interest rate and might be covered only in the fine print.
Some financial products allow you to extend your debt past the final term period. Usually these products add fees to the interest you already owe, which can create an ever-increasing debt that can be very hard to pay down.
At Fundbox we took a very common sense approach and backed it up with a lot of cutting edge data science. It is as simple as this: we assess business information to give small businesses access to credit by reviewing their accounting or bank data. They get cash right away, which eliminates a lot of the problems that come from not having the funds to invest in growth opportunities.