Connecting family and work can be a great source of satisfaction. With a family business, you can make a living working shoulder-to-shoulder with your beloved ones. And the best part is, you are leaving a legacy for generations to come. But running a family business also entails unique challenges and specific problems very different from any other type of business. If you have a family company, you should consider financing solutions that meet the typical needs of this type of business.
So, what financing options better fit the unique characteristics of a family business?
The Best Financing Options for Your Family Business
The following are some common avenues chosen by many family businesses. They allow businesses to grow sustainability, they let owners retain management of the company without depending on shareholders, and they offer reasonable terms and payment options that won’t compromise personal and family financials.
- Friends and Family
- What it is: Relying on friends and family allows you to work with people you know and trust. You set up repayment plans based on mutually agreed terms. But it’s always better to do formal rather than informal agreements to avoid any future conflicts.
- The Best Part: Using friends and family doesn’t usually require any approval process and aligns with the values of a family business. They’re also likely to be flexible if you run into any problems.
- The Not So Great: Mixing personal and business dealings can put a strain on relationships, especially if things aren’t going well. You’re also limited by what they’re willing to lend, which is usually small. This may mean hitting up multiple parties to raise enough funds, which may not work for everyone involved.
- What it is: Funding provided by centers, agencies and non-profit organizations to be invested in a specific purpose. These grants usually promote certain attributes such as research, minority-owned businesses, and specific industries such as green technology and more.
- What Makes This Awesome: Grants typically don’t have to be repaid. Once you receive the funds they are yours to use for your investment or project. There are several grants and programs for Latino-owned businesses to promote their growth and development.
- But They’re Hard to Get: Grants normally require an in-depth application process. They are typically limited in the amounts, in the way they can be used, and in the type of applicants who can use them.
- Invoice Factoring
- What it is: Invoice financing takes outstanding receivables due and finances them through a third party. Since there is a high likelihood of payment, lenders will give you the cash for those balances, less nominal fees.
- Everyone Does It: Financing from invoices is common practice for businesses of many sizes whether you run a family business or not. Many banks readily provide programs to customers to finance their receivables.
- The biggest disadvantage: You may not get much. Your total receivables limit the amount of financing available. If your business takes all payments in cash, this won’t be an option for you.
- SBA or Government Loans
- What it is: Both the U.S. Federal government and state governments offer loans to small businesses. The Small Business Administration (SBA) specifically works with smaller businesses to provide lower cost loans that might be available through traditional financing. There are also government loans for farmers, veterans, and other groups as well.
- Why It’s a Good Option: SBA loans are common practice for businesses of many sizes. You can take out amounts as low as a few thousand dollars to several hundred thousand depending on your needs. The loans are backed by the federal government and pretty straightforward in how they work. Their focus on long-term growth aligns well with the priorities of family-owned businesses.
- What Makes It Challenging: Most government loans require an established business as well as a thorough application process. There are many restrictions on who can take out a loan, how much they can apply for, and what industries or businesses may apply. Most of these loans require a significant amount of owner equity for new businesses.
- Camino Financial Small Business Loans
- What it is: Camino Financial small business loans come from an online, alternative lender that provides financing to small businesses for a variety of needs and situations. The customizability works especially well with family businesses that have unique needs.
- The Right Loan for You: Their flexible solutions offer custom lending that sizes the loans and terms to your needs so that the business takes out only what’s necessary, and pays as little as possible. The easy and hassle-free loan process and the quick turnaround make this option especially attractive for business owners. No collateral is needed to secure a loan, meaning you won’t have to risk your personal and family properties. Other additional benefits include the possibility to graduate to a second loan for a higher amount at a better term after just 9 months of timely payments, and the access to tools, resources, and exclusive webinars. As a family business owner, you know the importance of ongoing education to build the foundation of a sustainable, long-lasting business.
You can start your family business growth journey with Camino Financial by simply requesting a quote for a business loan. Applying will take just a few minutes, it won’t affect your credit, and you’ll know instantly if you prequalify.
Learn here all about Camino Financial small business loans: requirements, products, process, and the unique benefits that make this the best funding option for your family business.
The Satisfaction of a Family Business: A Personal Story
A decade ago my parents decided to leave their respective jobs and start their own medical practice. They used a combination of their own money, along with conventional financing to renovate an office, hire staff, and purchase equipment. They’re proud of what they built, and my middle sister, who intends to eventually take over the practice, got a chance to work and thrive. She took on management responsibility that otherwise wouldn’t have been available to her.
The situation remained difficult for many years, as insurance companies often take months to pay. Bringing in other doctors and therapists often took months. At the same time, my youngest sister was entering college. I remember long conversations with my mother about whether she took out enough money, whether she was paying too much for her loans, and what she would do if she came up short.
Looking back, I realize having a lender that could provide more than just basic, boilerplate loans would have made our lives infinitely easier. My family used a traditional bank and we kept our own counsel, and with time and much effort, we managed to succeed. But now you can learn from our experience: don’t just settle for a lender who merely provides funds: look for a financial partner instead that provides insights, tools, advice, and works with your needs.
Nowadays there are many alternative financing options that can ease the challenges of running a family business and adapt to your unique needs and goals. When seeking financing for your family business, turn to a lender that understands the peculiarities of your company. Turn to a partner who goes beyond lending funds: someone who provides personal treatment and excels in customer service. A lender proud of establishing long-term partnerships with their members. Rest assure Camino Financial can be that partner. Simply start your application today and check it for yourself.