Every business has to borrow money at some point. Whether it’s to cover startup costs or ensure that suppliers get paid on time during a month of overspending. Here are some of the best ways to borrow money for business purposes.
Bank loans offer some of the most favourable interest rates around. They’re an excellent option if you’re funding a startup or a need a big loan to help develop your business. Bank loans may require you to have a good credit score and may not pay out straightway (some bank loans can take up to six months to process) making them unsuitable in an emergency. This is Money has a useful guide on some of the best banks to use when taking out a business loan.
Platforms such as Prosper loans offer a new form of borrowing called peer-to-peer lending. This method involves borrowing from other users on the web who are willing to lend money to your cause. Specialist peer-to-peer lending sites offer a secure and fast platform for borrowing money. Interest rates are generally better than other forms of private loan and while you may still need a decent credit score; it may not need always to be as good as when taking out a bank loan.
BUSINESS CREDIT CARDS
For times when you only need to borrow small amounts or need to pay for emergencies, it’s useful to have a business credit card. The likes of Barclaycard offer credit cards with no annual fee that are specialised at businesses. Not everyone can trust themselves with a credit card – it’s all too easy to flash the plastic, so make sure you’ve got the self-restraint to borrow sensibly.
Invoice factoring is a unique form of borrowing that allows you to borrow money that you are due from late-paying clients. Once these clients pay you the money, you can then pay the borrowed money back to the lender. It allows you only to borrow money that you are rightly owed and can be useful in difficult times when clients aren’t paying up, but you need to pay your bills.
Finding investment technically isn’t a form of borrowing as you aren’t in any debt. That said, many investors often only give money in exchange for shares, which could mean giving away some ownership and some of your future profits. Seeking investment requires more persuasion tactics on your part than taking out a loan. You can find investment from an individual investor, an investment company or a group of investors. The latter is known as crowdfunding – may have multiple people investing, it’s often possible to raise more significant amounts. There are specialist crowdfunding sites such as Kickstarter set up for this purpose. Collaboration.