Small business loan options are constantly evolving. Becuase of which, securing the best funding deal for your business requires an understanding of all available funding options and their requirements.
Financing solutions have different loan terms, repayment methods, interest rates, and time to funding. So, it’s really your specific needs and opportunity that dictate the best option.
With an increasing number of funding options available outside of traditional bank loans, more and more small business owners are turning to alternative sources of funding.
Why? While banks are a reliable source for business loans, they can’t always match the speed and accessibility of alternative funding providers. Additionally, traditional bank loans tend to have rigid repayment structures that aren’t always favorable to small businesses.
Small Business Loan Options: Bank Alternatives
As a small business owner, you’ve probably faced a few financial challenges that could have been relieved by additional capital. Maybe you were unable to access the money needed to cover business costs during the slow season.
Perhaps you weren’t comfortable using your working capital to take advantage of opportunities to grow your business. Regardless, the good news is that there are small business loan options available for any circumstance.
Working Capital Loans
To meet some of your business’s temporary working capital needs, you can take advantage of a short-term working capital loan. While these loans operate like a traditional term loan, working capital loans are usually paid back in full within one a year and the time to funding is quicker.
You receive a lump sum of cash that you agree to pay back (along with the lender’s fees) over a set period of time. These short-term loans are great for companies that are short on cash flows, building up inventory, covering accounts payable, or finishing up small projects and business improvements that can yield quick returns. They’re also great for growing companies who are running short on cash.
Sometimes businesses don’t have enough working capital to fund daily operations and growth initiatives. The result is a compromise – management cuts expenses in one of the two areas limiting growth. Working capital loans ensure that there is enough available cash to fuel business growth.
Unlike most small business loan options, asset-based funding is secured by your business’s assets. What’s unique is that the asset itself determines the value of the loan and also serves as collateral. This also makes it more accessible because business can use their inventory, balance-sheet assets, or accounts receivable to secure the required loan amount.
With this type of business lending, you can use the extra cash to meet all sorts of business requirements, pay off unexpected expenses, or fill gaps in cash flows. While it’s most commonly tied to equipment or outstanding invoices, real-estate and other assets are also an option. The best type of asset-based funding depends on your specific situation, and the application requirements will vary by loan type. It’s important to remember that you cannot use the same asset as collateral for multiple loans.
Business Line of Credit
Instead of borrowing a sizable sum of cash, you can opt to open up a business line of credit instead. This type of financing is a revolving business loan that allows you to access money as needed, similar to using a credit card.
The lender approves you to borrow a specific amount of money to be used at your discretion. What’s nice is that you can borrow as much or as little as you like, as long as you don’t go over the specified limit. As soon as you fully repay the amount borrowed, the full line of credit becomes available to borrow again.
As one of the most flexible funding options, this type of business loan is ideal when you’re facing a temporary shortage of cash, and need access to money right away. Business lines of credit typically have better terms than credit cards but may require some form of collateral – especially with a very high credit limit.
Leaseback funding is great for small businesses that need working capital to pay for equipment. This type of funding is especially useful for businesses in the industrial, medical equipment, machinery, or computer industries. With leaseback funding, equipment is sold on paper and leased back to you for an agreed upon period of time. You can then use the money for funding daily operations or new investments, and you become responsible for paying regular lease payments until the equipment is paid in full.
There are lots of tax advantages with leaseback financing. In the majority of cases, 100% of the full payment can be written off, putting a little money back in your pocket at tax time.
Need Extra Cash to Build Your Business? Credibly Can Help
At Credibly, we’ve made our small business funding process fast, easy, and straightforward. All you need to do is fill out our online pre-qualification form and submit a few bank statements, and we’ll respond within 24 hours with the funding options you qualify for. Just select the best option, and get the funding you need to grow your business.