What sources are available to finance working capital needs of small businesses?

My answer to Quora:

Financing a small business usually requires a lot of creative means in order to come up with a viable financing strategy. There are a number of ways that small business owners can finance his or her business. Depending on the type of business, the expected return on investment and the complications that may arise financially, finding funding can vary. The scope of the project must be presented to any potential financiers in order to give them the gist of the business plan. Small business financing can be easy, depending on where you look to get your financing from. A few of the available options for financing growth are:

Small Business Loans

Probably the single most common method for funding business growth is by obtaining a small business loan. However, there are a number of different options that come with small business loans, and in order to choose the right one, you need to understand which loans work best with what type of enterprise. You should take into consideration the type of operation, size of the business in terms of staff and assets, and overall monthly or yearly return. Exploring options for loans can even clue you in to loans that are specifically designed for your type of enterprise. Loans can be either long-term or short-term, and each have their particular uses. Small business loans are usually very reliable, making them a great option for business financing available to small business owners.

Merchant Cash Advances and Alternative Funding Outlets

In addition to the secure line of finance offered by a small business loan, there are also a number of alternative funding outlets available to small business owners interested in funding growth and expansion of their businesses. Key among these are merchant cash advances which are suitable for any type of business that needs to get cash quickly. They are less demanding, and in a pinch a business owner can leverage his assets for access to a small financial boost. Alternative options that small business owners can use to finance their operations include:

  • Business Credit Cards: These are short term, variable interest rate loans that have the attached risks as a credit card. Making payments on time is essential.
  • Business Lines of Credit: Like an on-demand loan, these are granted to businesses at varying amounts, and the business only repays what it withdraws.
  • Merchant Cash Advances: Merchant agrees to sell a fixed dollar amount of its future “credit card receivables” at a discount. It is paid back by taking an agreed upon percentage of future credit card sales until the advance is paid back in full.
  • Cash Flow Loans - Type of debt financing, generally for working capital, using the expected cash flows that a borrowing company generates as collateral for the loan.
  • Revenue Based Loans - Instead of a business being required to pay fixed interest payments like a typical bank loan, a revenue based loan is paid with a percentage of revenues.
  • SBA Loans - Designed for a strong credit profile business owner, with strong cash flow and positive debt ratios. SBA Loans are the most challenging to obtain, but provide the lowest rates and longest terms.

Financing growth for small business owners, especially in a stagnating economy can be very hard. Business growth is determined partially by the amount of available capital. In order to ensure that your growth continues over time, you will need to ensure that you have ready access to capital. The best way to obtain funding for your small business, may be from a small business loan, total deposit advance or a merchant cash advance. Other alternative funding outlets can also work, but usually aren't worth the amount of effort that goes into obtaining funding from these locations. Companies such as LVRG specialize in providing working capital to help small businesses grow, doing so quickly and efficiently. For a small business looking at growth, a company such as LVRG is definitely a good place to start.

Revenue Based Financing, Cash Flow Loans & Working Capital Solutions to Boost Your Business... Your Way!