Business Financing

At a Glance

Businesses in need of capital have two choices: Debt or equity. While the level of debt can vary across industries, most companies find it necessary to balance between both. Business financing represents the debt side of raising capital – borrowing money from traditional or nontraditional lenders. This is a very large field with many different debt instruments that are often designed for specific purposes, allowing you to find a loan tailored to your circumstances, whether your need funds for an expansion or are covering the expenses of an emergency.

Benefits & Drawbacks

Benefits:

-Helps you raise the money you need to start or grow a new business
-Avoids the fees and ownership issues that come with using equity
-Allows you to see how your business compares to the current market
-Is useful for young companies trying to build healthy credit

Drawbacks:

-Collateral is often necessary
-Picking the right type of loan may be challenging
-Not all loan types may be available, while some may be too expensive
-Many different documents and records may be required

How Do I Choose the Right Business Financing?

Business financing comes in many shapes and sizes. Traditional loans may provide lump sums or pay out over several years. Other financing may offer lines of credit that can be drawn on, loans designed for very specific purposes (buying equipment, starting a new venture, etc.), or loans based on future cash flows.

The right financing depends on your situation: Why do you need a loan? How long have you been in business? What does your business credit rating look like? How do your past couple years of income compare to other companies in your industry? These are the types of questions that will decide what financing you can apply for – and what your loan terms will look like.

Where Do I Start?

First, understand why you need funding. You can browse through Loanry's business financing options to see what type of loan can help meet those needs most effectively. Second, begin gathering any necessary documents, such as tax returns, bank statements, P&L statements, cash flow statements, balance sheets, and so on. Lenders will want a very clear picture of your business before making a decision. Finally, prepare to meet with a lender: Note any questions you may want to ask about the loan terms or your current situation so that you will be prepared.