Small business owners often have to deal with difficult circumstances, especially in the teething stages and getting established. Many people are not financially able to fully support themselves and their small businesses entirely on their own. This is where alternative funding can be invaluable.
Alternative financing has allowed many small business owners to live their dreams of running a successful business without the stress of the financial constraints that often follow with little to no working capital. So, what types of alternative funding should you apply for? Let’s discuss some different methods of alternative financing.
When most people think of a standard type of loan, they most likely imagine a term loan. Term loans involve a person receiving a sum of money from a lender, which they pay back over a set period with interest. Term loans can be advantageous due to their simplicity and familiarity.
Short-term loans are very similar to term loans. You receive money from a lender and pay it back over a period determined between you. However, with short-term loans, this period to pay back the money is often far shorter than traditional term loans. This payment period typically resides between 6 and 18 months and will have a higher APR than regular term loans.
Merchant Cash Advances
Merchant cash advances are precisely what their name says: cash advances to a small business owner. These advances are then paid back with a percentage of your future daily credit card sales. Merchant cash advances usually have extremely high APRs and can be very expensive if not handled correctly. However, they are easy to get approved for and allow fast access to cash.
If you want to increase the cash flow of your business, consider invoice financing. This alternative funding method sees lenders give you up to 90% of your outstanding invoice. Once a customer pays off the total amount of the invoice, the owner receives the rest of the invoice amount, minus the lender’s fees.
Business Credit Cards
A business credit card allows small businesses to have lines of credit available in case they need them. Many small businesses have cash flow struggles, so these lines of credit can be helpful in emergencies. The lender will give a business a set amount of credit, while the small business owner only pays back the credit they use.
Equipment loans may be more niche than the other types of loans presented, but they can be beneficial in the right situations. These loans can only be used to purchase a piece of equipment for your business. You then pay back the loan just like any traditional term loan, with the equipment acting as collateral. Equipment can be costly; thus, these loans can be lifesavers.
Ditch the Banks
For more information on how to find alternative funding for your small business, contact Byzfunder today. We can help you receive the financing you need to put your business over the top!