3 Smart Alternatives to Traditional Business Funding Options

There are 30.6 million small businesses in the United States. The increasing number of businesses calls for more funding options. Though traditional business funding options are still available, many small businesses often find it hard to secure them. 

This is because of the stringent scrutiny, tedious application, and many requirements that come with traditional loans. But things have changed now. Both small and large can now access loans through a myriad of alternative lending options. 

If you have applied for traditional funding options unsuccessfully and are on the verge of giving up, check out these three reliable business funding options. They are easy to get, although they have their terms and conditions that you must understand.

1. Accounts Receivable Financing

Accounts receivable financing is also known as invoice factoring. It is a popular alternative to businesses with slow-paying clients. Those clients must be reputable government clients, other companies, or well-established clients who always pay on the promised date.

Invoice factoring is a short-term lending option. It is ideal for businesses to settle some urgent business emergencies before their clients pay the invoices. 

The maximum repayment period for the invoices is 120 days, which means that the loan should be settled within three months. The lender, known as the factor, buys the invoices or uses them as collateral.

2. Line of Credit

A line of credit funding helps businesses settle both their short and long-term needs. It works in a similar way to credit cards, whereby the lender deposits the amount on your credit line.

You don’t need to withdraw the entire amount on your line. Instead, you should only withdraw small amounts according to your needs. The lender can add more money to your account on request when you finish the first deposit.

One main advantage of this alternative business financing option is that the interest is only charged for the used money. Assuming that the lender deposits $200 to your account and you use $100, you will only repay the $100 you have used.

Note that the interest for a line of credit loan might be slightly higher than the other loans. As such, you should only apply for the loan when you need it.

3. Merchant Cash Advance

A merchant cash advance is another reliable funding option for people with enough business stock, as well as a study flow of income.

The lender accesses your business and gives you a loan based on the value of your business. For instance, if your future sales amount $1 million, the lender gives you up to 80 or 90% of that amount.

In return, the lender gets your future payments for the agreed fees and rates. A merchant cash advance is ideal for short term business needs.

Explore the Alternative Business Funding Options

There are many reliable alternative business funding options for both small and large firms. For example, if you consider expanding your product line by launching interval funds, a reliable fund administration solution can help you help determine the right direction. Don’t restrict yourself to the traditional banks if you can’t meet the qualifications. Review the available alternative lending options, understand them, and find a reliable lender.

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