Good financial management is one of the crucial factors that determine the success of your business. Without a steady working capital, your coffee shop will stagnate.
No money to invest means no possibility to expand your offer, to hire more people or to buy better equipment. In other words, there is no business growth.
But, how to ensure the necessary funds during the slow season?
How can you raise money at short notice when a great business opportunity arises?
What happens when your profit can’t cover such an investment?
The good news for all coffee shop owners out there is that there are various financing options to access the needed funds quickly. Some of them are unsecured business loans and business credit cards.
Now the question arises which of these options is the right for your coffee shop. Let’s take a more in-depth look into the pros and cons of both of them.
Fast money with no collateral: unsecured business loans
The main characteristic of unsecured business loans is that they don’t require pledging collateral, meaning that you don’t have to offer some property or another asset as a guarantee that you will pay.
Without collateral, you aren’t at risk to lose your house, car, inventory, or other assets which make this type of loan a safe investment.
The application process for unsecured business loans is shorter, given that it doesn’t include evaluation of the pledged collateral.
On the other hand, unsecured business loans include higher interest rates and offer a smaller loan amount. This happens because the lenders don’t have any guarantees in case you fail to pay back your debts.
Buying business inventory whenever you need: business credit cards
Business credit cards represent a fast way to constantly get cash for different needs for your coffee shop.
It’s easy to qualify for, and more importantly, it helps you build and improve your business credit, which can bring you many benefits if you apply for a loan in the future.
However, all these advantages come at a certain price. Business credit cards include various fees, and they can harm your personal credit if you don’t use them wisely or miss your payments.
Unsecured business loans or business credit cards? That is the question
If you still aren’t sure which option is the best for your business, maybe a real-life example from another coffee shop owner might help decide.
Adam Manson has been running a coffee shop for two years. He wanted to grow his business by investing in new equipment. This would help him increase the productivity of his staff and serve more clients.
The coffee machines that Adam needed were on sale, but still, he needed $5,000, so he had to get the necessary money fast.
Adam considered unsecured business loans and business credit cards as the quickest way to ensure the working capital. He could qualify for a business credit card, but he didn’t want to put his personal credit at stake because he was planning to buy a house. On the other hand, an unsecured business loan was a safe investment that didn’t involve any of his private or professional assets, but Adam had to pay a higher interest rate.
After taking into consideration all the factors and the fact that this investment will quickly pay off, Adam opted for an unsecured business loan.
Why? He only needed the money that time, he was not going to make continuous purchases (if so, he would have chosen a business credit card).
What does your business needs?
Whether you are looking for new ways to finance your business endeavors or you need a cash injection to help you seize great business opportunities, unsecured business loans can give you a hand.
Follow Adam’s example and ensure working capital for your coffee shop growth. It’s an investment that will definitely pay off in the long run.
Which one is a better fit for your business? Let us know!