8 Questions to Ask When Figuring Out What Type of Financing is Right for Your Business
There always comes a time when a business owner needs money to expand, take care of emergency situations or to take advantage of an opportunity. In these cases, getting business financing becomes top of mind, but with so many options today, how do you know which kind of financing best suits your business needs? Here are eight great questions to ask yourself to help you figure it all out.
When do I need the money?
The unexpected can happen at any time. Your refrigerator may break all of a sudden, or you may find yourself needing cash fast because tax season is coming up and you need to pay. In these situations, a cash advance or equipment financing is your best option.
What payment options should I choose?
When it comes to paying your funds back, you need to understand the terms of each option the lender is giving you and make sure you will be able to pay back the amount in the allowed time. Some lenders, like Select Funding will provide you with short-term financing up to 18 months and will even give you a discount if you pay your financing early.
How quickly will I see an ROI?
This all depends on what you will be using the money for. If you use it for something like renovations, you may not see a return on investment right away. But if you use it for something like Marketing then your ROI will more likely come in sooner.
How much do I need?
If it’s for a small project that will cost you anywhere from $5-150,000, then you could opt for short-term financing. If you need more than that you will need to look into longer term loans or even an SBA loan.
How much does my credit score matter?
Your FICO score is extremely important, but not in every case. With non-traditional lenders you generally don’t need a great FICO score. Non-traditional lenders are not FICO score driven; they mainly look at the health of your business and use that to determine if they can approve your business.
Will I need collateral?
For some kinds of financing the answer is none. When you talk with a non-traditional lender, they usually won’t ask for any collateral for small business financing. But they may need it if you want to finance equipment.
Does sitting on an application matter?
Yes, it definitely does. Whether you need a quick fix like a merchant cash advance or something more long term like a business line of credit, following through once you start the application matters. If you stall, lenders might re-underwrite the file. That creates doubt and decreases your chances of getting the money. Hesitation can ruin your chances of getting the funds that best fit your business needs.
Will I need to renew my financing?
There’s a big difference between getting financing to fix your broken equipment and one that helps you get through slow months in your business. Decide if your needs will be ongoing. In some cases, it means the difference between waiting for a few days to get your money or up to a month.