This blog originally appeared on MorganStanley.com and is being used with permission as part of their partnership with Excelerate America.
Whether your business is brand new or has been established for decades, you may be at a point where you need financing in order to grow. Perhaps your established medical practice is ready to add cutting-edge imaging machines. Or your boutique needs to double its inventory of an in-demand handbag to increase profits. Maybe your company is outgrowing its office space, needs to hire more employees, or is considering an acquisition. In any case, growth could be within your grasp—if you can get the right financing.
Securing Financing Can Be Difficult
Entrepreneurs often need to get creative in order to access the capital they need to grow their business. Typical financing options include personal or business credit cards, borrowing against securities portfolios, and taking out commercial loans. Each of these options carries pros and cons, some of which we'll discuss below:
Option: Tapping unsecured credit, such as credit cards
Credit cards are a popular source of funding for small businesses. According to the National Small Business Association, a 2017 report found that 31 percent of small business owners used a credit card in the past year to access capital1.
Option: Take out a commercial loan
A business loan or line of credit from a bank, credit union or online funder is another common way to secure financing.
Option: Borrow against your portfolio
A securities based loan, or SBL, uses eligible securities in a brokerage account as collateral for a loan or line of credit.
With the complexities businesses face in acquiring needed capital, it makes sense for business owners to consider all sources of financing before deciding where to apply and to review all the pros and cons before applying for any type of loan.
1National Small Business Association 2017 Year-End Economic Report https://nsba.biz/wp-content/uploads/2018/02/Year-End-Economic-Report-2017.pdf
2CreditCards.com Credit Card Interest Rates Chart. https://www.creditcards.com/credit-card-news/historic-credit-card-interest-rate-chart.php