The ability to acquire additional financing gives any business a competitive edge. No matter how smart an entrepreneur you are, a time comes when all you need is an injection of funding to get to the next level.
For retailers, the challenge is to acquire quick financing to keep up with their ever-changing needs. But gone are the days when merchants relied solely on traditional bank loans, today you can consider more creative and faster options.
If you ever get caught in catch-22, then maybe you are searching in the wrong place or haven’t explored all the available options.
The right place for you may vary from time to time, based on factors such as;
- The amount you’re after
- The purpose of the credit
- How urgent you need the funding
- How you plan to repay
- Your credit score
Other things, such as borrowing terms, may also be the reason you favor one product over another.
That being said, what are your many options when sourcing for extra business funding?
- Bank Loans
Traditional lenders, like banking institutions and credit unions, have stricter terms than their modern counterparts.
Bank loan applications involve a credit pull and a thorough underwriting process that could last days or weeks.
These lenders also decide how much funding you deserve after measuring the value of your business, as well as its ability to pay the loan.
Lastly, many lenders offer low-interest rates and are quick to accept firms with a desirable credit background.
- Hard Money Loans
These products are available for entrepreneurs with property to hold as collateral. The property proves to the lender you can settle the loan.
Unlike old-school financers, Hard cash lenders prioritize collateral over credit scores. They also feature a simple application procedure and almost instant loan processing and distribution.
Crowdfunding is a web-only form of funding where investors with a common interest team up to contribute a target amount which they use to support their preferred entrepreneurs. Investors can contribute to the pool via debt, equity, or rewards.
The best projects also offer training on how to utilize the funds to help a business move forward.
Each crowdfunding platform has its own rules concerning borrowing rates, disbursement of finances, and so on.
- Angel Investors
These are successful investors who are out to support startups. Angel investors have established their businesses, and their only focus is to assist young companies.
Though they offer small loans, you can get access to larger amounts if your business shows good potential. After an injection of funding, these investors take on an active role in your business. For instance, they could join the board of governors or take part in company decision-making.
- Merchant Cash Advance
MCAs offer finances to microbusinesses in trade for a portion (%) of the company’s per day credit card sales over a specific period. The cash provider provides a lump sum and then automatically takes away the agreed-upon percentage off the company’s per-day credit card sales.
The total amount paid back is worked out by a “factor rate,” which varies depending on the company’s financial status. The factor rate is multiplied by the advance amount to get the full amount the retailer is to repay.
The percentage only determines what is remitted per day to reach the total payback amount within the agreed span.
This funding is excellent for a business looking to deal with cash flow problems.
Apart from these sources, there are half-a-dozen other alternative small business loans. Remember to scrutinize a product thoroughly before sending an application.
Michael Hollis is a Detroit native who now lives in Los Angeles. He is an account executive who has helped hundreds of business owners with their alternative small business loans. He’s experimented with various occupations: computer programming, dog-training, scientificating… But his favorite job is the one he’s now doing full time — providing business funding for hard-working business owners across the country.