Your small business has more financing options than ever before. Because banks are making it harder than ever for your small business to get the financing it needs, alternative lending options are emerging more and more to help fill the void.
If your small business is looking to avoid the lengthy application process, long wait time, and conditions that come with bank-offered small business loans, here are 3 alternative financing options that can help.
1. Term Loans
What is a Term Loan?
A term loan is a monetary loan that is paid back in a series of payments over a set amount of time. This type of loan typically lasts between 1 and 10 years. In some cases, a term loan can last up to 30 years, depending on your personal circumstance. A term loan also includes an unfixed interest rate that will act as payment for the service of the loan.
Why Should You Use Term Loans?
A term loan is a great financing option for a small business with 2+ years under its belt that have good credit. A business financing company will work with your business to get you a loan faster than a bank. Interest rates for term loans are often higher than those from a bank, but they can be completed entirely online and have longer repayment terms.
2. Merchant Cash Advances
What is A Merchant Cash Advance?
A merchant cash advance is a different kind of loan. Like a normal loan, you will get a large sum of funding. Rather than having monthly, biweekly, or other payment contracts, the lending company will take a percentage of your sales.
For example, say your are a pizza restaurant. You need a large oven to cook your pizza, but can’t afford it on your own. With a merchant cash advance, you will get the funds for the oven in full, but pay it back though a small percentage of pizza sales. With every slice sold, the financier will get a small portion at a time to reduce the loan.
Why Should You Use A Merchant Cash Advance?
Although this type of loan is generally more expensive than bank loans, it’s a better fit for B2C establishments. Because payments are smaller and terms are shorter, a restaurant, retail store or other B2C establishment can greatly benefit from it.
If you are a B2B business, merchant cash advances are not the best option. Your business gets paid via check or direct deposits. Merchant cash advances are better suited for small loans rather than the larger payments that you have with invoices.
3. Invoice Factoring
What is Invoice Factoring?
Invoice factoring is type of cash flow loan that will help your business to get cash quickly. A business financing company, or factoring company, will purchase your outstanding invoices and give you a cash advance for up to 96% of the amount. You generally receive the advance in as little as 24 hours.
Why Should You Use Invoice Factoring?
Invoice factoring is one of the easiest and safest financing solutions for businesses of any size. Because a business financing company purchases your outstanding invoices, they take on 100% of the risk if your client defaults on payments. Unlike loans, invoice factoring gives you the amount of financing you need, not any more or any less. This will help control cash flow when waiting for large orders to be processed, and will allow your business to catch up with its fast growth. Also, you get your payments faster than any other form of business financing. There are other types of factoring that are designed to help you get more specific funding for your business.
With these 3 alternative business financing options, your business will now be able to get the funds it needs faster than through a bank. We hope that you utilize these financing options to control your business’s finances and grow larger than you ever thought possible.