Starting a business requires a full-fledged plan, a personalized roadmap, and, most importantly, financing. While your business may have an amazing plan, the execution is always achieved with proper financing. Usually, businesses prefer drawing a loan. The problem is that the application is often rejected because of taxing eligibility and other criteria that most retail businesses fail to meet.
However, a bank loan isn’t the only financing option retail businesses have. In this article, we will be covering the top 5 financing options for retail businesses.
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Top 5 Financing Options For Retail Businesses
- Drawing a Home Equity Loan
Houses are a fundamental asset that could be used to draw a loan and provide adequate funding for your business. One of the best ways to avail financing options for your business is by drawing a home equity loan.
In terms of a home equity loan, the borrower usually provides their own home’s equity as collateral. Even though there might be a current existing loan on the asset, it could be used to draw a new personal loan. Drawing a home equity loan allows the borrowers to take additional loan amounts against their share in the joint property.
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- Borrowing a Loan Against Your Name (Personal Loans)
Personal loans are probably one of the most drawn loans by people worldwide. One of the best things about personal loans is that they could provide adequate financing for your business or even set up a new one in the right environment.
Usually, in drawing personal loans, assets aren’t used as collateral, and the loan tenure is also pretty flexible compared to commercial loans. The interest rates on personal loans are also different depending on bank to bank and lender to lender. Compared to commercial loans, personal loans are also fairly easy to get, and the processing fee is also normal.
- Term Loans
Depending on the necessity and the time period, a business term loan could be short-term or long-term. Term loans can offer small/large amounts of money depending on the requirement of the borrower. These loans are ideal in need of emergency financing options or a pinch.
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While short-term loans may have a repayment time frame of less than a year, long-term loans can have a repayment time period of up to 10 years from the date of borrowing. Drawing a long-term loan is usually possible only for huge enterprises that have been in business for a long time and can provide a significant collateral asset. As such, MSMEs can always choose short-term loans.
- Business Line of Credit
Like a business credit card, a business line of credit allows business owners to pay for things only when needed, along with interest. When it comes to finding more flexible options, a business line of credit can immediately provide cash ‘only’ when you need it.
On the downside, a business line of credit has a limited amount of money that could be spent. If the expenses are over the spending limit, the business owner might look for other options. Along with that, a business line of credit also has a rigorous application process with hefty charges varying from lender to lender.
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- Approaching Angel Investors
Being one of the most traditional approaches to raising funds for your business, angel investors are one of the best options for availing of a new financing option for your retail businesses. Angel investors consist of established businessmen and corporations that can provide a loan, usually in an investment for a business.
As easy as it sounds, angel investors are usually rare to find. However, if you have a promising business and a future roadmap, you might eventually contact an angel investor. Talking about the returns and repayments for an angel investor, it never happens in EMIs.
Rather, the investor will have an equity share in your business where they will share a particular percentage of profits with you. It is also in the interest of angel investors to invest in successful businesses as they can start drawing even more revenue than what they invested in the business.
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Conclusion
Applying for a business loan is a process that requires you to carefully evaluate your options. If you are just starting from scratch, you can also set up a fundraising platform that could help you raise some capital. Take time in choosing your options. Settle with an option that doesn’t require you to put all your important assets as collateral and demands a lot more from you than what you imagined.
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