<br/> <br/> The idea that options available for small business owners come down to selections between traditional financing, factoring companies , or venture capital is the wrong way to examine funding small business efforts. Even if the business depends entirely on debt financing to fuel its capital needs, business owners should look at the financing options offered to them as a 'portfolio' of investment choices.<br/><br/>One size does not fit all-- two or three sizes don't fit all either.<br/><br/><br/><br/><br/> Many of the Main Street businesses we mention here will incite growth and fund working capital with borrowed money or cash flow. The good news is, there are a good deal of alternatives accessible. Sadly, many small business owners review the selections as an either/or choice to be made. I think it makes good sense to look at financing options that are appropriate to different scenarios and how they might work together to help small business owners discover the capital they need.<br/><br/>For example, a good relationship with a community banker is crucial to the long-term health of a small business. That's not to say an SBA loan or some other traditional loan is the most ideal and only solution to the financing requirements of the local dry cleaner or restaurant. Yes, interest rates are lower on a traditional fixed-term loan, but how quickly a small business owner can access capital could be problematic with a term loan that takes weeks or months to fund if the small business owner really needs the cash today.<br/><br/>And, the major obstacle is that many Main Street business owners don't have the credit, time in business, or revenues to meet traditional loan requirements. This is particularly painful for early or idea-phase startups. No history, no product, and no revenues generally mean no loan.<br/><br/>For a business owner who doesn't fit the underwriting requirements of a traditional lender, alternative loan products can help establish credit while allowing the borrower to fill his or her short-term capital requirements. Factoring companies have less rigid lending guidelines than does the local bank-- but that comes with higher interest rates. As a result of higher interest rates, small business owners should review repayment terms of a few months rather than a couple of years. Although receivable financing may be a highly effective tool when used correctly, it can also be very costly if misused.<br/><br/>Many small business owners who do get low-interest term loans still turn to alternative financing methods as a short-term bridge to a traditional term loan while they await a traditional loan to become funded. If the business owner is seeking to take advantage of an opportunity and can't expect an SBA or other traditional loan to close, the extra interest they pay over the two or three months they wait is well worth almost instant availability to capital offered by invoice factoring .<br/><br/><br/><br/><br/>When looking into the numerous funding choices available for small business owners, some of the questions that should be asked include:.<br/>1. What is the range of terms offered?<br/>2. Are there any upfront costs?<br/>3. What is the minimum credit score required in order to get the loan?<br/>4. Precisely what are the underwriting criteria in addition to my credit score?<br/>5. How quickly can the loan be funded?<br/>6. Will I require the cash now, or can I wait?<br/>7. Will I have the option to make regular and prompt payments?<br/>A small business owner should deal with his or her credit score like a valuable asset. At times short-term financial judgments have long-term implications. For example; a business owner that had a good business idea but no collateral, no income, and no credit was distressed and upset that lenders weren't interested in his idea and weren't falling all over themselves to offer him money. He wasn't considering bootstrapping because it would cause him to scale back his growth plans. It wasn't what he wanted to hear, but bootstrapping his idea was the only real choice available and the approach I suggested. Many incredibly successful companies were started by an entrepreneur who bootstrapped his way to the top.<br/><br/> Exactly what's the most effective approach for your Main Street business? There are certainly more than just one or even a mix of many possibilities-- once size does not fit all.