The 3 Things No One Told You About Outside Financing
We are one month into a new quarter. How’s your business doing? Are you thinking about expanding? Do you need new equipment? There are a ton of different reasons why your business may need outside financing. Looking for an outsider financier can be frustrating, scary, and overwhelming. Here’s what you need to know about outside financing.
The Difference in Loans
Your first thought for outside financing is likely just going out and getting a loan. Here’s what you need to know about loans. Most new businesses are unable to get an actual business loan. A business loan is money that is loaned to a business. So, if John Smith owned Smith Accounting, LLC, the loan would be made to Smith Accounting, LLC. Yet, the only way that company would get a loan is if they already had good business credit established and had enough assets to cover the loan amount if the company goes into default. Of course, there are other criteria involved in a business loan. However, the point behind an example is to show you that for a business itself to get a loan, there are certain criteria that the business must meet.
Most business owners use personal lines of credit (personal loans) as outside financing for their business. John Smith would go to a bank or a credit union. Although he would explain to the loan officer that he wants to use the loan for business purposes and the bank still may want information about the business (particularly if it is the only source of income that the person has), the loan would be based on John Smith’s credit worthiness and not the business. The loan would not be made to Smith Accounting, LLC. It would be made to John Smith. Regardless of what happens to the business, John Smith would be responsible for repaying the loan.
Investors as Outside Financing
There are different types of investors. Angel investors are people who donate money into a business and they do not want anything in return. They do it just to help. An investor may want you to pay back the investment with interest over a certain amount of time. Other investors may want lifetime rights of some kind. If you choose to work with an investor, it is worth the money to ask a lawyer to explain the agreement to you. This is the best way for you to know if you’re getting a fair deal from the investment.
You Can Make Finding a Loan Fast and Easy
If you’re seeking outside financing for your business, Clients ARM can make the process faster and easier. Clients ARM is not a financier. Rather, we provide a free service to business owners that we call Hello Finance Manager. We help business owners find outside financing. Shopping around for your outside financing needs can have several benefits for you. It can result in a lower interest rate. It can also result in you being able to find a payment that fits your budget. To learn more about Hello Finance Manager, check out this article or give us a call!