Business Debt Financing

The issue of business debt financing is a crucial one for any entrepreneur who wishes to start a new business or to help an existing venture grow and flourish. Entering into any area of industry, large or small, will always involve a certain amount of capital. Most companies do not have sufficient cash on hand to accomplish all of their goals and make a successful entry into the world of commerce without attaining a loan. This is not a sign of weakness, but rather a fact of life in the business world. Attaining business debt financing from an independent source such as a bank or other lending institution means that a company is able to plot their own destiny. When interested parties or financial backers furnish a part of a company's operating capital, that backer will most likely require a certain amount of oversight into the policies and procedures that are put in place. Avoiding this kind of external interference is very important for many entrepreneurs. There are also certain tax deductions that may apply when a company borrows money from a conventional source. An unfortunate downside to taking on debt for business purposes is that if the company should fail, the borrower will still need to pay back the debt. Repaying this indebtedness without the benefit of any income that the company might have generated can prove to be difficult if not impossible.

For small businesses, the choice between taking a traditional approach or to obtain funding in another way is always an option. In addition to obtaining funds from a conventional lender, there are other solutions available including equity and hybrid financing. Equity lending involves borrowing from investors or pulling money from an entrepreneur's personal savings and using it to invest in the company. Small business debt financing might involve taking out a short term loan that will be paid back in six months or less. Loans that involve longer terms are often used to pay for assets such as equipment or the renovation of property. In addition to short or long term loans, lines of credit can also serve as a solid supply of capital. The line of credit allows the borrower to draw out funds on an as needed basis. In the event of unexpected expenses or a sudden crisis, a line of credit can come in very handy for small companies. As a company grows, the ability to pay back business debt financing should grow as well. Lending opportunities for small companies are not limited to just the traditional loan. There are also credit cards that are specifically geared toward the needs of smaller industry and commerce concerns. Some businesses utilize these charge accounts in lieu of other borrowing options.

Credit cards may not be the wisest choice in the area of business debt financing due to the high interest rates. But as a convenient way to handle day to day needs, credit cards can work well as long as the balance is paid off each month. For many start up companies, conventional loans are not an option. The requirements that must be met before funding can be approved are often too stringent for new businesses to meet. For this reason, many new companies are dependant on the personal funds of the owner for capital. A major benefit of this approach is that the entrepreneur who supplies their own funding will also retain all ownership and equity. For many entrepreneurs, hanging on to a full time job until the company gets off the ground is a necessity. Ironically, after a small venture has begun to pick up speed, opportunities for business debt financing tend to increase. This is because the perceived value of the new company has improved. The Bible talks about the value of the love of Christ. "And to know the love of Christ, which passeth knowledge, that ye might be filled with all the fullness of God." (Ephesians 3:19)

After a business has been in existence for a while, debts that have accumulated may come in the form of several different loans. If this is the case, handling business debt financing through loan consolidation may be a viable option. Lower monthly payments are just one benefit of this approach. The availability of extra capital each month can open up new possibilities for success. By consolidating indebtedness, many companies find that they are paying lower interest rates and can obtain friendlier lending terms. Loans that are taken out using a company's assets as collateral can also supply needed capital. Secured debt such as this does have its drawbacks. In the event of a downturn in business, the assets that are serving as collateral will be put at risk. Some lending institutions also offer funding that involves a revolving credit approach that uses the company's assets as collateral.

Established businesses often have succeeded at handling any issues concerning start up funding. These companies may be moving along smoothly, having met prior goals and having reached a level of stability. At this point, the business's main priority could involve attaining funds for growth. This type of business debt financing dilemma generally involves a whole new set of problems than when the venture was in its infancy. Promoting growth while meeting daily capital needs can be a challenge. Whether the need is for an expansion of current facilities, moving into a more global marketplace, or making necessary updates to existing infrastructure, finding suitable financial solutions can mean the difference between real growth and stagnancy. Collateral loans need not be based on physical assets only. When a company has a number of outstanding purchase orders or other income generating activity, these things can function as collateral for funding as well.

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