Which Form of Financing Is Best for a Technology Company?

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Which Form of Financing Is Best for a Technology Company?

6 Financing Options for Your Technology Company

It’s no secret that it is difficult to get a loan from a big bank. In fact, according to a 2022 study, only 14.3% percent of small businesses were approved for loans by the big banks. The reason? Banks are more interested in lending to larger businesses with established track records.

If you’re a technology company looking for financing, this can be extremely frustrating.

Thankfully, getting a small business loan is easier from an alternative lender that offers loans specifically for small businesses, including technology companies.

In this blog post, we’ll discuss which type of loan is best for your business and why alternative lenders are a great option for tech companies.

Financing Options You Should Consider for Your Tech or IT Company

1. Working Capital Loan for Day-to-Day Operational Needs

Working capital loans are ideal for tech companies that need to cover day-to-day operational expenses, such as purchasing new equipment or paying salaries. These loans typically have lower interest rates than other types of short-term financing, and can be obtained quickly (some small business lenders even assess your application in as little as 4 hours). 

2. Equipment Financing for the Hardware Investments You’ve Been Meaning to Make

If your business needs to purchase new equipment or hardware for growth or development, an equipment financing loan can help you make these investments. This type of loan is ideal specifically for high-value purchases because the equipment you buy serves as collateral for the loan.

Effectively, that makes equipment financing a secured loan, meaning you can enjoy longer repayment periods and lower interests.

3. Line of Credit for Flexible Credit When You Need It

A line of credit can give your company the flexibility it needs to succeed. Unlike a loan, you only use the line of credit when you need the funds and pay interest on what you borrow.

For tech companies that experience rapid growth or are trying to launch a new product or service, this type of financing can be an invaluable tool. The line of credit can be repaid and re-used as necessary, giving your business the time it needs to achieve success without getting stuck with debt you can’t afford.

4. Invoice Factoring to Unlock Capital From Amounts You Are Due to Receive

If your business has outstanding invoices, a financing option called invoice factoring can unlock the capital you need. Instead of waiting for payments from your customers, a small business lender will ‘purchase’ these invoices and give you an advance on the money you are owed, allowing you to use this cash for any purpose you desire. 

⚠️ Think Long and Hard Before Using a Business Credit Card for Financing!

While a business credit card can seem like an appealing option for financing, there’s a catch. Business credit cards typically come with high interest rates and fees, which can quickly add up.

5. Long Term Business Loans for Expansion and Bigger Projects

If your IT or tech company is looking to expand or take on larger projects, a long-term business loan can provide the capital you need. Whether it’s a new office space, additional employees, or other expenses associated with growth and expansion, long term loans can be structured to meet your needs and provide you with flexible repayment options.

6. SBA Loans (Though There’s a Catch)

While not technically considered an “alternative lender,” small business SBA loans are a financing option that many tech companies find helpful. Though they can be more difficult to obtain than other types of loans, these loans offer the added benefit of government backing and lower interest rates.

Here’s the catch with SBA loans: they require a lot of time and paperwork. This can make them less appealing to tech companies looking for quick access to capital.

How Do You Find the Right Option for Your Tech Company?

The key to finding the right financing option for your IT or technology company is to do your research. Consider each of these options in detail, and work with a small business lender that can help you assess which type of loan will provide the most benefit for your company. With the right funding in place, you’ll be able to grow and scale your business with confidence.


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