Pre-Series Funding: How to Fund Business Activities Using Loans
A lot of startup founders and business owners immediately jump to funding rounds when it comes to funding their startups. While there is nothing wrong with seeking funding from investors, funding rounds aren’t the only way to fund business and product ideas.
As investors make the shift from funding for a valuation to funding for sustainability, startups need to be smarter with their funding plan. Not all business processes and activities must rely on investments, making business loans more attractive as a pre-series funding option.
The Right Loan for the Job
Let’s start with the fact that there are more business loans to choose from, even when your startup is relatively young. Financial institutions are appreciating startups for their leanness and drive for innovation. Modern loan requirements are designed to be easier to meet, even by startups.
Aside from traditional business loans, you can also rely on a business line of credit and business cash advance to fund smaller expansions. There are also financing options such as invoice factoring for back-to-back financing of orders and projects.
Even better, finding the best loans to use is easy now that there are websites like AdvancedPoint Merchant Capital offering access to multiple quotes at the click of a button. You only need to fill a simple form to get quotes from multiple lenders.
Good Cost-Return Ratio
Loans are much more flexible compared to investments. You are not giving up ownership of the company, which means you can use loans as financial leverage to boost the value of your startup while maximizing the benefits of that increase in value.
Measuring the cost-return ratio of a loan is easier since most loans come with a fixed interest rate; this means the cost of using the loan is predetermined when you apply for it. All you need to do is compare interest and other fees with the potential return you get from using the loan.
It is even possible to improve the business loan cost-return ratio, mainly by reducing the cost of using loans. Comparing loans is a good way to start. You get quotes from providers and can compare them to find a good loan that suits you.
Don’t forget that loans are also easier to take out, which means you can get the funding you need faster than when you rely on investment rounds. Fast approval is something that many lenders and financial institutions now offer, particularly when dealing with startups.
There are loans that are instantly available by design. A business line of credit, for instance, remains available once approved. You can use the line of credit to fund projects and repay the loan once the project invoices clear. The same is true with invoice factoring and back-to-back loans.
The ability to take out loans makes streamlining your business processes easier. Instead of having to secure investments to maintain a certain level of business growth, you can simply be smart with how you leverage loans to your advantage.
All of these tips and tricks lead to better use of business loans in general. If your startup is at its growth stage and you want to keep it sustainable, leveraging business loans is a funding solution to consider.