While most business owners know about typical term loans, SBA loans, or lines of credit, these may not always be the best fit for a company’s needs. There are other loan products and options out there that businesses can use to get the funding they need without the headaches of some of those common funding options.
Here are 3 lesser-known business loan or funding options that you should consider the next time you need to access cash for your company’s unique needs.
1. Merchant Cash Advances
All businesses that accept credit card payments have a third-party credit card processing agreement. Those processing companies often offer cash advance options.
They will lend your business cash upfront in exchange for a small percentage of your credit card income until the loan is paid off. Typically the loan amount and payback percentage will vary based on the lender, the history between the companies, and the amount of regular credit card income.
These loans are perfect for companies that don’t want extra loan payments added to their stack of bills as everything is done automatically. But be aware that the interest rates for these types of loans can get quite high. Do your research before securing one of these.
If you like the idea of borrowing from a bank or other large lender, but don’t want the hassle of large loans with long terms, microloans might fit your needs best. These are loans for between $5,000 and $50,000 offered by those big lenders.
These loans often come with shorter terms, less overall interest, and shorter approval times. Often they can be completed within a day or two.
3. Peer-to-peer Lending
Peer-to-peer borrowing is a relatively new option for small businesses. A handful of websites have popped up that serve as a platform to connect businesses to large amounts of potential investors or lenders. These are regular people often investing small amounts of money at a time. The platforms can pool them together to get you the cash you need.
Borrowing this way keeps banks and big lenders out of the picture altogether and give you more freedom to pay back these loans in a way that works for you. You’ll need to do a good job of selling your business or idea as investors on these platforms often have many options to choose from.
As you know there is more than one way to skin a cat. When your business needs funding, take the time to find the right option for you and you’ll put yourself in a place to succeed more often than not.