Everything Small Business Owners, Startups and Entrepreneurs Should Know About Business Funding

When you’re running your own business, it’s inevitable that you’ll need some sort of business funding to thrive and survive.

Even the most successful business owners don’t hesitate to take out a small business loan or other type of financing, as it allows them to effectively manage their cashflow whilst investing in important areas such as staff, equipment, or premises – all of which help their venture to grow.

As a business owner, entrepreneur or startup, it can be difficult to know exactly where you should begin when it comes to acquiring financing for your small business. If you’re in this position, don’t fret. We’re going to teach you everything a small business owner, startup, or entrepreneur should know about business funding!

What are the Different Ways You Can Finance Your Small Business?

Thanks to alternative lenders, you no longer need to limit your business financing options to just the big four banks. While there may be more finance options for your small business than ever before, it can still be tricky determining exactly what type is best for you. Along with this, many financing options will also have pre-requisites to determine if you’re eligible for the cash boost. These include aspects such as the size of your business, how long you’ve been running, your industry, financial health and more.

Business loans are perhaps one of the most popular forms of small business funding, which is why we’ll talk more about these in detail below. If you’re after something a little different to a loan, then fear not – we’ll also be listing other forms of small business financing towards the end of this post.

Small Business Loans

Just as we mentioned that there are plenty of different financing options for your business, there are also quite a few different types of loans. Two common loan types are long-term and short-term business loans, which although seem quite similar, actually contain some notable differences.

While each loan type has a contrasting loan repayment period (i.e. short-term versus long-term), they also dictate how much a small business can borrow. Short term loans are repaid over a shorter period of time, usually around 3 to 18 months. With a short term loan, businesses can access the capital they need more quickly, often within as little as 24 hours.

With an unsecured short term loan (we’ll talk about unsecured loans in a minute!), you may be able to borrow anywhere from $5,000 to 250,000, although a larger amount is likely possible with a secured loan. With a long-term loan, however, business owners are able to borrow anywhere from $250,000 to $50,000,000 and can then pay it back in monthly, quarterly, half yearly or in annual repayment cycles over a period of least 12 months to up to 30 years.

As a small business, that amount is likely to be higher than you need, so it is always beneficial to use a business loan repayment calculator to determine how much you can actually afford to borrow.

What are Unsecured Business Loans?

Remember how we mentioned unsecured short term loans above? An unsecured business loan (whether short term, long term, etc.) simply refers to financing that is obtained without providing collateral. According to Lumi:

“Collateral is something that you or your business owns that you pledge as security for repayment and could include property, such as your home or vehicle, your savings, unpaid invoices, inventory and more. With unsecured business loans, the lender cannot seek repayment by going after your assets. However, you still need to meet income and credit requirements, and many alternative lenders ask for a personal guarantee from the directors of the business.”

Therefore, with a secured loan, the opposite applies. In the case that you are unable to repay your loan successfully, you may lose a personal asset such as your home. This is why unsecured business loans are becoming a much more popular option among entrepreneurs, startups, and small business owners.

How to Apply for an Unsecured Business Loan

Thankfully, applying for an unsecured business loan can be done online in a matter of minutes. Alternative lenders such as Lumi (based in Sydney, Australia) have a fast, online application form for small business owners to fill in, with individuals able to receive their loan outcome in less than 24 hours. After all, who wants to wait for days or weeks on end to receive their lending decision, when that time would better be spent concentrating on your business?

Startup Loans: Can Your New Business Get a Business Loan?

As the number of startups in Australia are at an all-time high (with these figures showing no signs of slowing down over the coming years), it’s inevitable that more and more startups are now turning to alternative lenders to seek funding too.

While as little as a few years ago, your business had to be largely established to gain financing, this is now a thing of the past. With an online lender such as Lumi, they only ask that a business has been operating for at least 6 months. Additionally, the business must be an Australian registered business with a minimum gross annual turnover of $50,000.

For startups who don’t meet these requirements, it’s important not to fret. You can either keep hustling along until you qualify for a startup business loan (especially if it’s just the period of operation holding you back), or you can research the other types of business funding listed below to see if they may be a better fit.

Other Types of Business Funding

• Business credit card
• Invoice financing
• Business line of credit
• Equipment financing
• Merchant cash advance
• Business overdraft
• Business microloan

Are you considering applying for any of the small business financing options mentioned in this post? What aspects of business do you struggle with the most? We’d love to hear from small business owners, entrepreneurs, or startups in the comments below!