The only thing harder than starting a business is keeping it going. After five years, only forty-eight percent of small businesses still have their doors open.

Many of these businesses have to close their doors because of the inability to find lending solutions. This problem is even more difficult for new businesses who have yet to prove their concept.

Depending on where your business is at in its lifecycle, there are different options for borrowing. Read on to learn more about your options and find out how to decide what the best solution is for your needs.

Define Your Needs for Lending Solutions

Every lending option has its own pros and cons. Some will allow you to borrow more money than others, some have higher interests rates than others, and some are harder to secure than others.

To decide what the best choice is for your business, you need to figure out how much you can afford to pay on your loan and what your expectations are for repayment.

Consider Small Business Administration Loans

Small business administration loans are a great option for established businesses with good credit scores and borrowing histories. They are the gold standard when it comes to borrowing and you can secure millions of dollars if you have right guarantees in place.

These loans can be used to purchase equipment, refinance your business, buy new real estate, or to remodel. All you need is to have been in business for more than two years, have more than a hundred thousand dollars in annual revenue, and have a great credit score.

Consider Term Loans

A term loan is the most basic everyday loan. Since they aren’t designed specifically for business purposes, you may find yourself paying slightly more interest than you would otherwise.

The interest rates typically range between seven and thirty percent based on your creditworthiness. They can be used for any business purchase and all you need is to have been in business for more than a year with more than ninety thousand dollars a year in revenue.

Be aware that term loans often won’t allow you to save money by paying off the balance in advance, so make sure you calculate the full cost of interest before you choose to borrow.

Consider Short-Term Loans

When you are trying to scale your business, you may just need a short-term loan for three to eighteen months. This is a great option if your credit score is lacking or if you need money yesterday.

You can typically borrow as much as $250,000 with this kind of loan allowing you to take advantage of growth opportunities and turn the tides for your business.

Make sure you consider your businesses cash flow when you decide to take on a short-term loan. The payments will need to come out of your capital as it comes in.

Consider Taking Out a Line of Credit

A line of credit is a very flexible lending solution. It allows you to borrow what you need without having to pay interest on excess funds within the loan.

They are a great option for businesses who need capital for expenses over time, rather than to make a single large purchase. The interest rates are similar to that of credit cards, ranging from seven to twenty-five percent based on what your credit score is.

Unfortunately, if your score is low, you can expect to pay the highest interest rate and provide additional documentation that proves you are able to pay the money back.

Applying for a line of credit is a great option when you first open your business. You may not need to use it at the time, but it will give you access to capital when you need it later.

Consider Financing Your Equipment

If you run a restaurant or other business that requires costly equipment, then you should consider renting it instead of buying it outright.

By financing your equipment, you can make payments over time and since the equipment is a form of collateral all on its own, you won’t need as good of a credit score in order to secure this kind of financing.

Another option to consider is leasing your equipment until you see how your business fairs in the marketplace. That way you won’t have to worry about equipment maintenance costs and you can scale up your equipment as your business expands.

Consider Invoice Financing

Invoice financing, also known as accounts receivable financing, may sound really fancy, but it’s really just a term for borrowing money based on the outstanding invoices your business is currently owed.

These funds are best for funding a new business project while you are waiting to be paid on the last one. If you have reliable customers that pay their invoices on time then you shouldn’t have too much trouble securing this financing.

Expect to only be able to borrow fifty to ninety percent of the total amount your invoice is for and expect to pay a fee of around three percent. If the invoice is repaid after its due date, then you could end up incurring additional fees, so make sure you only choose this kind of financing if you trust your customers.

More Resources for Small Businesses

Finding lending solutions for your small business may seem like an insurmountable obstacle but with the right planning, you will eventually secure the funding you need.

Make sure you consider all of your options and do your research before making a decision on what form of financing to use. For more advice for your small business, check out our blog today.