If you are planning to put up a small business but your cash flow seems to be limited, you can consider financing firms as your option. However, it is also important that you know which of these options are suitable for you because there are firms that only cater to businesses that they deem stable and are less likely to fail. You might be disheartened at first to consider these firms but they can really help you in more ways than one.
1. Merchant cash advances are considered a great alternative to people who seem to have a hard time securing traditional loans. This type of finance option can be used for funding a project. With this option, you are purchasing future income. It is entirely different from traditional loans because it requires you to pay a certain percentage of your credit card sales until you pay off the amount you borrowed. Compared to other options, merchant cash advances can be a bit costly. It is usually preferred by companies with strong credit card sales such as restaurants.
2. Bank loans are also a popular option but if you are just putting up a small business, you may find it challenging to consider this form of financing. This is due to the fact that banks usually prefer loan companies composed of experienced owners because they are the ones that can prove they have already made a profit from their business.
3. Factoring is another option you can consider and this is based on invoices. For individuals who have just started a small business, this is considered a more flexible option. As compared to other finance options, it is much easier to qualify for factoring. The process involved in factoring includes purchasing your accounts receivables and advances and it is usually up to 90% of the total. If the service-based companies do not have collateral, they usually turn to factoring. Even start ups and companies that only have seasonal operation can take advantage of this option.
4. The asset based lending is almost similar to bank loans with only a slight difference. The amount of money you are allowed to borrow will be dependent on the percentage of your total assets which are being taken into consideration. For this financing option, the lender may be able to provide you up to 85% of the accounts receivables. You can choose this option if bank loans do not give you the flexibility you are looking for.
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