Business Loans: Are They the Only Form of Business Financing?
Lots of small businesses out there rely on business loans in order to kick things off and promote growth during those early years. The problem with business loans is that banks are no longer dishing them out quite as liberally as they did prior to the financial crisis. This is posing a huge problem for lots of would-be business owners who simply don’t have the means to fund their own start up, or take their start up to the next level. This has caused a lot of small business owners and entrepreneurs to look into alternative business financing.
What are the options?
The good news is that there are various forms of alternative business financing out there – they include merchant cash advances, credit cards, overdrafts, and even angel investment. One of the most common alternative financing options is a merchant cash advance – they’re growing in popularity fast because they’re a lot more accessible than business loans.
With a merchant cash advance a company will buy a chunk of your future sales. As those sales are made, the company will skim off a small percentage in order to repay the cash advance. A merchant cash advance is like a loan in the respect that you get a large lump sum upfront, but unlike a loan the debt doesn’t accrue interest – and there are no fixed monthly repayments.
Banks tend to be a little more liberal when it comes to approving small businesses for credit cards and overdrafts – but these forms of financing tend to be geared towards businesses looking to borrow relatively small amounts of money in the short term. Angel investment is also something that business owners should look into – especially those in the start up phase. Funds from angel investors often don’t require any form of guarantee or collateral – but the flip side of that is that you have to convince an investor that your business or idea is worth them putting their money into, which isn’t always straight forward.