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Finance Options For Small And Micro Business Owners

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Finance Options For Small And Micro Business Owners

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Starting up a business is easy. What’s not is keeping it afloat and scaling up through time and tide.

According to a survey, nearly half of the startups close just after a year, and mainly because of lack of funds. And out of the remaining, nearly two-thirds are forced to file for bankruptcy due to inconsistent cash flow.

Nonetheless, there are some easy financing solutions, particularly for small and micro-businesses. And they are mentioned below.

Invoice Financing

For small and micro-businesses, seeking a loan from conventional banks is not easy. Mainly, owing to the limiting credit scores. However, apart from the conventional banks, business owners can easily opt for private financing solutions.

One of the most convenient solutions offered by private lenders is invoice financing. As the name suggests, business owners can secure a loan depending upon the debtors and amount due to receive.

The creditors use this information to estimate a lending amount and recover the repayment with every invoice that is cleared.

Merchant Cash Advances

Another convenient solution for small and micro-business owners is seeking a merchant cash advance. However, as mentioned here, https://www.nav.com/business-financing-options/merchant-cash-advance/, this solution is only available for businesses that process payments using credit cards.

Unlike invoice financing, a merchant cash advance lender usually recovers the repayment from credit card payments. A portion of every transaction is recovered by the creditor. And the remaining sum is transferred to the business account.

The benefit that this form of financing has over invoice financing is the continual flow of cash. Unlike invoice financing, the amount is transferred right away to the business account. Thus, providing the business with cash at hand to operate day-to-day expenses.

Grants/Crowdfunding

If none of the above solutions work for you, here’s another one. You can raise funds from grants or crowdfunding programs.

However, it is also noteworthy that these funds are usually accountable under tax slabs. In other words, you’ll need to pay tax on the amount you receive through grants or crowdfunding.

Besides, you’ll also need to specify the source of funds in your income tax return.

Peer-to-Peer Lending

Last but not least is a P2P lending option. Assisted by the internet and technology it works like Match.com for borrowers and creditors.

In its simplest form, peer-to-peer lending works as a mediator between a borrower and a lender. The borrower simply submits their requirement and accordingly, a lender makes their offer.

If mutually agreed, the lender lends out the money to the borrower. However, it is noteworthy that this form of lending mostly lacks risk evaluation for the borrower.

Small and micro-business owners are one of the most crucial parts of any economy, for they are the major players that drive day-to-day economic transactions. With easy to borrow lending solutions, empowering the small business community is amongst the top priorities for any country.

That being said, government aids are still amongst the least of the suitable financing solutions for business owners. And subsequently, turning to private lenders seems easier and more convenient.

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