The Easiest Ways to Get Business Lines of Credit
The first year for any business is difficult, but this is especially true for small businesses. The management of budgets and the fluctuations of cash flows to young firmsmake survival difficult. Thisis why many new companiesrely on lines of credit to help finance operations until revenue can match projections. However, as a young business, it can be difficult to secure a moreconventional loan, but with social media and other lending platforms,it is not impossible.
Social media has given rise to a significant financial trend, crowdfunding. Sites like Kickstarter and IndieGoGo have allowed for several startups to not only fund their venturebut to avoid the initial cash flow hiccups. These sites operate by providing a platform for businesses to reach a large pool of potential investors. Thismeans that instead of seeking high-profile partnerships through one-on-one meetings, small businesses can streamline their efforts while simultaneously asking for numerous small donations.
While lines of credit are nice, you may be able to find interested parties who are willing to fund a startup on the front end for a piece of the profits later. Partnerships are an excellentway to delegate financial responsibility, but they may come with a loss of control. Partners can be friends, family or other interested investors. If opting for a partnership, be sure to specify the role of every investor relationship to avoid possible legal battles later.
The most traditional way of securing credit is through conventional/traditional means. Banks and lenders may offer either securedor unsecured lines of credit to a business, but the availability of either depends on the revenue history of the companyor the credit history of the owner. Forfirmswith a proven track record, a financial lender may offer an unsecured line of credit, which is basedon the projections of future sales. For new businesses or those with limited cash flows, a lender may offer a secured line of credit, meaning that they will require collateral. In either case, an owner’scredit history may influence the lender’sfinal decision.
Small Business Administration
If crowdfunding is too tricky, partnerships are too risky, and traditional credit is currently unattainable, then an SBA loan may be the best option.The 7(a) loan program was explicitly designedwith startups in mind. The funds can be used to establish, expand and operate a business. Additionally, as the SBA secures these loans, lenders are willing to take more risks, allowing those with less than perfect credit to apply.
Lines of credit are the lifeblood of small businesses and startups. While the first year is traditionally the most difficult, credit allows a companyto maintain operations until cash flow is restored.