4 Smart Financing Options for Businesses Past the Startup Stage

You’re not the new business on the block anymore, but you might still need help. Securing financing for your company typically isn’t a one-time deal. Most businesses need funding at multiple stages in their growth. For mid-tier businesses that have a few years of experience under their belts but are still gaining traction, extra capital can make the difference between slow, incremental progress and swift success.

But where do you begin? You’re not a startup trying to prove your worth, but you don’t have a long history of steady profits (yet!), either. Fortunately, there are still plenty of financing options out there.

Here are four of the best solutions to consider as a mid-tier business:

1. Line of credit

A line of credit can be helpful for mid-level businesses with either short-term or recurring financial needs.

With a line of credit, you get access to a set amount of money — anywhere from $5,000 to $1 million, depending on the lender — that you can use on an ongoing basis. If, for example, you’re waiting on accounts receivable but need to issue payroll, you can dip into your line of credit to pay your employees on time.

Similar to a credit card, you don’t make payments or accrue interest on a line of credit until you use your funds, and you can usually access your funds continually as long as you pay off your balance. It’s important to stay within your spending limit and make payments on time, though — doing so could help improve your business credit score, and if you don’t, your interest rate could increase dramatically.

2. Business credit card

A business credit card lets you borrow money on an ongoing basis as well. You have a certain amount of credit available to you, and you can use some or all of it depending on your needs.

If, for example, you have $30,000 and use $20,000 to renovate your warehouse, you’ll have access to the full $30,000 again once you pay back the $20,000 (plus interest, if applicable).

The average APR for business credit cards is 15.37%*, but you also have to take into account other potential fees, such as late payment penalties. The minimum monthly payment usually works out to 1-3% of your credit card balance. Keep in mind, though, that only paying the minimum will cause you to rack up interest and accumulate more debt.

If you pay off your balance in full each month, not only will you save money on interest, but you could also build business credit. And the stronger your business credit score, the more likely you are to get approved for other types of financing — like bank loans — in the future.

3. SBA loan

SBA loans are a great option for businesses with long-term financial investments, like a building purchase. Lending amounts range from $25,000 to $5 million, with terms up to 25 years. These loans are backed by the SBA, but the funds come from participating lenders, which means the application and acceptance process is notoriously tough.  

To apply, you need to provide a business plan, several years worth of tax returns and bank statements, profit and loss statements, and more. Once you submit your application, you usually have to wait a few months before you receive a response — even if that response is a decline.

If you can afford to wait for financing, an SBA loan can be a great option because of its lower interest rates, which average around 6%*. But if you need money quicker — to purchase a second business, for example — waiting for approval might interfere with your plans.

4. Alternative financing

If you don’t want to go the traditional bank route, there are plenty of alternative online lenders that make financing easier and more accessible to growing companies.

Term loans through Funding Circle are a fantastic solution for mid-tier businesses that need financing for larger projects, like relocating or launching a new product. Funding Circle offers flexible terms and repayment over a period of six months to five years, with fixed annual interest rates.

Our transparent, once-monthly payment structure makes it easy to budget and plan, so you can focus on growing your business instead of getting out of debt.

Unlike traditional bank loans, applying for Funding Circle loans is easy and fast. You can submit an online application in just 10 minutes, receive a response in as little as 24 hours once you submit your paperwork, and get funds in your bank account as quick as five days after you accept.

Tips for applying for a loan

Before you start filling out forms, make sure you’re ready for the financing process. Follow these three steps to prepare.

1. Consider why you need funding.

The first step to securing financing is figuring out how you plan to use the money — both so you can assess where to find it, and also because your lender of choice may ask. Do you need capital to hire new employees, expand your product line, or ensure you have enough cash flow for an upcoming busy season? How much money do you need?

Nailing down these details will help you determine what type of loan and payment plan is best for you.

2. Check your credit score and financial records.

It’s a good idea to meet with your accountant, if you have one, to go over your personal and company finances. Check your credit score, cash flow, profit and loss statements, and revenue history. Understanding where you’re at financially will give you a better idea of what types of loans you can qualify for, and what you may need to improve upon going forward.

3. Gather your paperwork.

The paperwork you need will depend largely on the type of loan you apply for, but it’s smart to get ahead of the game and start compiling basic information early. Gather any business certificates and licenses you have, as well as your recent tax returns and bank statements to start.

While alternative lenders don’t typically require you to submit a formal business plan, you should still create a basic outline for the funds to keep for your own records. Make sure you write out how the extra capital will contribute to your business’ success and growth as well. Doing this can help you stay on track with your goals.

If you need help, consider using a tool like Silver Lining Action Plan, which helps mid-level businesses create actionable growth plans to help increase profits and improve customer retention.

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