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5 Best Ways to Secure Loans for Start-ups and Small Sized Businesses

It is not the idea that takes time, it is the efforts required to bring it to reality!

One of the ongoing challenges facing most start-ups and small businesses is to raise the funds needed to support initial growth. Everything from setting up an office to purchasing equipment and tools to purchasing other assets requires a lot of capital. In addition, working capital management is the most important aspect of any business. Therefore, obtaining a loan is one of the easiest options.

As the number of small businesses and start-ups grows, so does the demand for innovative financing models. By the beginning of 2020, there are approximately 5.9 million small businesses in the UK, accounting for almost 60% of the total employment. These companies require the best financial options to make them successful.

Going to a bank may seem like the first choice, but getting a loan from a large bank can be a cumbersome choice. Traditional loans may not be suitable for new or small businesses looking for unsecured options with low interest rates and flexible repayment methods. So, here are 5 Best Ways to Secure Loans for Start-ups and Small Sized Businesses.

1. Unsecured business loans

Most start-ups and small businesses do not have a large amount of collateral or mortgage assets to use as collateral. The biggest advantage of this kind of loan is that it does not require any security, and the approval and payment of the loan are based on the assessment of financial status, growth forecast, and legal capacity. An unsecured loan fuel the capital required in the business to procure assets and start operations.

2. Invoice Finance

For SMEs that need instant cash flow to conduct business, Invoice Finance is a good option. It unlocks the cash tied up in invoices or credit sales. If the company issues invoices that should be paid within 30 to 90 days, the company can obtain loans against these invoices. There are two variants: invoice factoring (also known as debt factoring) and invoice discounting.

3. Bootstrapping

This involves using own financial resources and personal savings to start a business or invest in an existing one. It has associated Risks as it is based solely on personal savings.

4. Crowdfunding

Do you have a good idea, are you ready to share it with the outside world? Crowdfunding is the best method. However, since it comes down to sharing concepts, business plans, and other details with the outside world, this may not be the best choice for many companies or startups.

5. Asset Finance

The capital cost of pre-purchasing assets will put pressure on the company’s working capital. Asset financing can release cash related to your existing business assets. Allows the purchase of new equipment, such as leased machinery or vehicles, the business can choose to purchase assets at the end of the contract. Common types of asset financing are equipment leases, financial leases, and hire purchase agreements. Asset financing provides a viable option to obtain assets without any upfront costs. Then, the company pays monthly fees within the agreed time frame.

For any start-up or small-sized businesses looking for financing options, evaluating the above options is a must.

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