Give us a call for more info 1-800-210-5649
Skip to content

Master the New Funding Rules for Small and Medium Scale Businesses

The covid 19 pandemic changed the business environment, especially for small and medium scale merchants. Survival for most businesses depended solely on turning to e-commerce. However, finding lenders to facilitate this shift became a hurdle for many small businesses as traditional lenders opted to lend to big established companies.

This article demonstrates new funding approaches that are changing the capital financing environment to give small business owners opportunities of growing their enterprises.

Funding Approaches

First is important to recognize the difference between funding and a loan. Generally, business loans require security to access and come with complicated conditions for the repayment process. While funding enjoys a much more flexible approach, the institution and merchant agree on how the funds can be used within the business model and repayment terms.

When you decide which approach to go with, ensure you follow these steps for a successful application process: 

  1. Make sure you have a good credit history. This profile is achieved by making sure you pay your suppliers and vendors on time and checking up on your credit score and reports.
  2. Ensure your business incorporates a digital footprint. Online activities will give you accurate records of your business and significantly increase your chances of securing funding. Incorporating digital mechanisms such as cloud/online accounting services or machines like a POS system would be best. 

 Where to access different lending options

Knowledge and information about the different financing alternatives are important to an entrepreneur or start-up.

Here are several financing options available, depending on the nature of your business.

  • Bank loans – Come in the form of fixed period loans or overdrafts; a business or entrepreneur who receives this business loan is always limited by the worth of their security, such as fixed assets, property, or insurance policies.
  •  Hire purchase or Term financing is also known as leasing and is often confused with bank loans. Term financing is where banks directly finance a business with movable assets, and these assets also act as security for the loan.
  • Private equity finance– It is financing done away from public markets. It involves private investors putting funds into a business with a potential for success and growth, as shown by its track record or business plan.
  • Merchant Cash Advance– This form of lending offers discretion to the merchant and requires no security. It’s a fast and flexible option for merchants to access funding for their business. These funds are paid back through a percentage of the business’s future receivable return or turnover. 
  • Private unstructured loans– Generally come from family and friends or close associates. This financing follows no set rules and is based on the agreements of the lender and receiver. Mostly they have short repayment periods and higher interest rates than other lending institutions.

It’s crucial to know and ask what is needed before approaching any institution for funding or a business loan. To sustain and grow your business, only borrow amounts you can pay back comfortably.