Things to ponder when choosing a source of financing for your small capital business

Given that there is the sheer amount of financing alternatives available in the market, selecting a suitable source to fund your small capital business can be a hard and time-consuming task. In most cases, funding a business comes in the form of an investment or debt. However, the criteria and implication of any source requires critical analysis before making a decision. For that reason, it is vital to weigh the cost and benefits of all the sources to help you make an informed decision.

The following are some of the things a business owner needs to consider before deciding on the source suitable for their business needs.

Risk

This is one of the fundamental things to ponder. One must have an idea of what will happen if they fail to meet the financial demands associated with a particular source of business funding. For instance, before you take a business loan from a bank you need to have an alternative on how to pay back the loan if your business experience a financial crisis. You need to strive and minimize the overall risk by taking a business funding from the merchant cash advance industry.

Cost

Note that when choosing a financing option for your small capital business, the cost of finance and its impact on the income will play a vital role in making the decision. When it comes to getting a loan, your overall aim should be to minimize the cost of funding. Thus, it is important to consider getting your business funding for your business from a merchant cash advance lender as recommended by experts. It is evident that with merchant cash advance, you will never go wrong since you don’t need any fees to get the funding.

Control

This is another aspect that plays a vital role when it comes to selecting a source of finance. For instance, if you choose equity financing over merchant cash advance lending, it means that you will be forced to give every investor a portion of ownership in your business and they will be accountable to those shares. However, once you decide to get a loan from a merchant lender, you will not lose control of your business since you will still be making major decisions about your business without consulting your merchant lender.  Once you complete paying back the loan, your relationship with the merchant cash advance lender ceases until the time you will need small capital business funding again. On the other hand, the investors still own part of your business until they are sold out, the business is sold or when it goes public.

Long term versus short term borrowing

When looking for small capital business funding, you need to determine if it should be a long term or short term financing. For instance, if you are obtaining a loan to purchase a noncurrent asset, that will create a permanent part of your business operating base, then you can consider taking a merchant cash advance loan. This is because you are entitled to get the amount you need that comes with a flexible repayment plan.