Small Business Loan Alternatives

Many small businesses in the market today are hesitant to work with traditional banks when they are in need of a loan. Traditional banks often deny applicants starting a new business. They also frequently deny applicants with credit issues or who have month-to-month income streams. Small businesses often look for other loan alternatives to simplify the borrowing process, save money by reducing interest costs, or simply to expand their money supply without sacrificing their autonomy. Learn more about these other loan alternatives to discover which option is best for your small business.

Asset-Based Lending

Asset-based lending is an ideal option to established companies looking for a business loan. Businesses can sell their receivables to a factoring company to receive money in a fast amount of time. Some asset-lenders will even approve loans based on a business inventory or purchase orders. Businesses can receive most of their funding up front using this lending alternative, and rather than being “in the hole” with debt, the loan is based on the assets which can, or will, be sold anyways. Applicants can expect to pay a percent of financing cost, however, as even for asset-based loans, banks still don’t exactly give ’em away for free! The annual interest rate for this lending alternative can be anywhere from 18 to 30 percent. Shop around for a lower rate if possible.

Cash Advances

Whether you have a new or established business, cash advances are a popular lending option for business owners. Cash advancement lenders will give businesses a large amount of money in exchange for a percentage of their daily credit card receipts. The percentage of the daily credit card receipts can vary, but it’s usually around 20 percent. Businesses can also expect to pay an additional fee for using this type of lending alternative. This loan alternative is only for established businesses that make a certain amount of money in credit cards on a monthly basis. In terms of cost, this option is often inferior to a standard small business loan – but if your business can’t get a traditional loan, it’s certainly something to consider.

Many small companies are looking for other lending alternatives to finance their business. Alternative lending is particularly ideal for new businesses, or for businesses that can’t get approved for standard loans. Asset-based lending companies provide businesses with a large amount of cash when companies sell their receivables. Businesses can also receive cash advancement when they sell a certain percentages of their daily credit card sales. While these options aren’t necessarily ideal, in a pinch they can be used to help your business stay in the game until things improve.