Innovative Options in Small Business Loans


Jeffrey Bumbales

As a business owner, you know that it takes money to make money. Whether you’re just starting a business, or looking to expand, it can’t be done without cold-hard cash. The thing is, working capital is sometimes short for one reason or another, but this shouldn’t stand in the way of you following your dream of owning and running a successful business in your niche of choice.

A small business loan can come in handy in all sorts of scenarios:

  • Buying inventory and equipment
  • Bridging invoicing gaps
  • Managing cash flow
  • Hiring new employees
  • Renovating and remodeling
  • Covering unexpected expenses
  • Running advertising campaigns
  • Moving to a new location

What Innovative Small Business Loan Options Are Available?

These days, you’ve got plenty of options when it comes to alternative lending programs.

Short-Term Small Business Loans

There may be times when certain scenarios come up that warrant the need for extra cash. A short-term small business loan can offer you these funds when your budget is a little tight.

These loans tend to be very well suited for certain needs such as buying seasonal inventory, refinancing other short-term debts, or bridging the gap between invoicing and incoming payments. With a short-term business loan, the money you are given is paid back along with a set fee as specified by your lender. Unlike longer-term loans, the payback time period is much shorter, and the amounts loaned out tend to be smaller.

If, however, you require a much larger sum of money on a long-term basis, you may consider a long-term financing program instead.

Advantages – With a short-term small business loan, you don’t have to spend a lot of time filling out paperwork. Approval and funding is usually done very quickly, and the money can then be used for just about any business need. Since the term of the loan is short-lived, debt does not stay on your credit rating for a long time.

Disadvantages – A short-term loan could come attached with higher interest rates compared to long-term loans. In addition, you might be required to put up some collateral in order to get approved.

Working Capital Loans

Many small business owners use the cash they have on hand to cover their day-to-day operations. With a working capital loan, you can leave your cash flow alone and have extra money available to do even more. If you’re unable to generate the revenue needed to meet daily expenses, a working capital loan might be the solution for that too. Whether you’re improving your current business, investing in marketing campaigns, or dealing with taxes, the extra money can be just what you need.

Unlike traditional loans that are designed for specific business purposes, you don’t have to identify the purpose of the loan to the lender when applying for a working capital loan. This type of financing option is better suited for those who just need to access quick cash to cover daily operating expenses, as opposed to larger, longer-term financing needs.

Advantages – With a working capital loan, you don’t need a high credit score nor any collateral. Approval is quick, and funding is available in as little as 48 hours.

Disadvantages – Since unsecured working capital loans are riskier for lenders, they usually come with higher interest rates compared to secured business loans. In addition, the more you continue to borrow, the more negatively your credit rating could be affected.

Invoice Financing

Many times there may be a delay between time of customer and supplier invoicing and time of payment. During this waiting period, your working capital can be negatively affected.

With invoice financing, your cash flow can be much more predictable, which can ease the burden on you if you’re running low on working capital or desperately need to cover other expenses. With this program, you sell an invoice to the lender, after which they will provide you with 85 percent of the total invoice value. The rest of the balance is held in a reserve, from which the lender will take a certain fee. After this fee has been deducted, you get back whatever remains in the reserve fund when your customer’s payment comes through.

This type of financing is obviously only suited for businesses that currently have outstanding receivables. It should be noted that financing firms will pull your credit report when you’re applying for invoice financing.

Advantages – With invoice financing, you can breathe a sigh of relief knowing that money is in your hands, even while waiting for the actual payments to come in. Access to cash is fast, and you don’t need to come up with collateral.

Disadvantages – The longer your customers take to pay you back, the more money you may owe the lender. The fees associated with invoice financing tend to be higher compared to traditional financing as well.

Business Cash Advance

For a quick and easy way to get the fast cash you need, a business cash advance may be a great option. Even if you’ve got bad credit and zero collateral, you can still be approved for such a financing program.

With this option, you’re given cash to be spent on whatever pressing financial needs you might have. The amount that you are advanced is multiplied by a ‘factor rate,’ which will help determine how much you’ll have to pay back to the lender.

In return, you agree to pay back this advance by allowing the lender to take a portion of your daily credit card receivables until the entire cash advance has been repaid in full. Typical repayment time periods range from 8 to 9 months. The higher the percentage rate of the portion that the lender takes, the shorter the repayment time frame will be.

Advantages – There are no minimum monthly payments to be made with a business cash advance. And because the amount repaid every day is a direct reflection of that day’s sales, you’ll never have to pay out more than you bring in. There’s no collateral needed, nor a stellar credit rating. Cash is advanced quickly, which can be used however you see fit.

Disadvantages – This type of financing arrangement typically comes with higher interest rates compared to other funding options.

Which Business Loan Option is Best For Your Small Business?

At Credibly, we match our clients with the best funding solution for their short-term needs and long-term goals. We also understand that not every option is well suited for every small business owner. That’s why we take the time to discuss your financial needs and business health with you to help you make the right decision when it comes to innovative options in small business loans. 

To get started, fill out our online application or contact our customer success team at (888) 991-3954 and they’ll walk you through the best financing options for your business.