nullThe thought that alternatives readily available for medium-sized business owners come down to solutions between traditional financing, invoice factoring companies , or venture capital is the wrong way to examine financing medium-sized business initiatives. Even when the business relies solely on debt financing to fuel its capital demands, business owners should take a look at the financing options available to them as a 'portfolio' of investment choices.<br/><br/>One size does not fit all-- two or three sizes don't fit all either.<br/><br/><br/><br/><br/> The majority of the Main Street businesses we mention here will fuel growth and fund working capital with borrowed money or cash flow. The good thing is, there are a great deal of choices accessible. The sad thing is, many small business owners take a look at the options as an either/or choice to be made. I think it makes good sense to consider financing solutions that are appropriate to different scenarios and how they might work together to help small business owners get the capital they need.<br/><br/> As an example, a good relationship with a community banker is crucial to the long-term health of a small business. That's not to say an SBA loan or other traditional loan is the most effective and only solution to the financing demands of the local dry cleaner or restaurant. Yes, interest rates are lower on a traditional fixed-term loan, but how fast a small business owner can get access to capital could be problematic with a term loan that takes weeks or months to fund if the small business owner needs to have the cash now.<br/><br/>And, the major obstacle is that many Main Street business owners don't have the credit, time in business, or revenues to meet traditional loan requirements. This is particularly distressing for early or idea-phase startups. No history, no product, and no revenues typically mean no loan.<br/><br/>For a business owner who doesn't fit the underwriting guidelines of a traditional lender, factoring company products can help establish credit while letting the borrower to fill his or her short-term capital needs. Alternative lenders have less rigid lending requirements than does the local bank-- but that comes with higher interest rates. Due to a lot higher interest rates, small business owners should take a look at repayment terms of a few months rather than a couple of years. Although factoring company financing can possibly be a powerful resource when used the right way, it can also be very costly if misused.<br/><br/>Many small business owners who do get low-interest term loans still resort invoice factoring techniques as a short-term bridge to a traditional term loan while they wait for a traditional loan to become funded. If the business owner is attempting to take advantage of an opportunity and can't wait for an SBA or other traditional loan to close, the additional interest they pay over the two or three months they wait is well worth almost instant accessibility to capital offered by factoring companies .<br/><br/><br/><br/><br/>When examining the many financing options available for small business owners, a couple of the questions that should be asked include:.<br/>1. What is the range of terms readily available?<br/>2. Are there any upfront costs?<br/>3. What is the minimum credit score needed to obtain the loan?<br/>4. Precisely what are the underwriting criteria along with my credit score?<br/>5. Just how rapidly can the loan be funded?<br/>6. Will I need the cash now, or can I stand by?<br/>7. Will I have the ability to make regular and prompt payments?<br/>A small business owner should deal with his or her credit score like a priceless asset. Often times short-term financial choices have long-term outcomes. For example; a business owner that had a pretty good business idea but no collateral, no income, and no credit was frustrated and dismayed that lenders weren't curious about his idea and weren't falling all over themselves to grant him money. He wasn't considering bootstrapping because it would cause him to scale back his growth plans. It wasn't what he wanted to hear, but bootstrapping his idea was the only real option available and the approach I suggested. Many exceptionally successful companies were launched by an entrepreneur who bootstrapped his way to the top.<br/><br/> Exactly what's the very best strategy for your Main Street business? There are certainly a lot more than one and even a combination of many selections-- once size does not fit everything.