When the time comes, one of the biggest challenges business owners face is deciding which small business loan is right for them – and then securing it in a timely manner. All loan options are not created equal, and some take longer than others to get much needed cash. If you’re considering applying for a small business loan, make sure you research all of your options.
Types of Small Business Loans
In this digital age we live in, there are more small business loan types on the market today than ever before. Access to funding is also easier and more straightforward than in years past. Even so, some options are still faster than others, and many involve more red tape and wait times. The key is to find the cash solution that works best for your business type, your industry and your unique situation.
Merchant cash advance
Known for being one of the more flexible options, a merchant cash advance provides an alternative to the traditional small business loan. Technically, a cash advance is not a loan – it is a sale. You’re selling a slice of your future credit card sales in exchange for an upfront sum of cash. How much money the lender is willing to lend will depend on the volume of customer sales and other factors.
Yet another flexible, fast option, invoice financing – or invoice factoring – is designed for businesses that invoice customers and clients. This option is also not a loan, but a sale. The factoring company purchases your unpaid invoices at a discount in exchange for immediate capital (in as little as 24 hours). The factor then assumes the responsibility of collecting payment for the invoice from your customer.
A more traditional option, a term loan is repaid in regular payments over a set period of time – less flexible than the previous options. They typically last between one to ten years, but some can last as long as 30 years, and usually involve an unfixed interest rate.
Business credit card
An often go-to option for business owners is a business credit card. One benefit of this option is that, if managed correctly, it allows you to build up a positive business credit rating (different from a personal credit rating). Rather than waiting on a bank’s approval, it also offers a quick source of credit when unexpected expenses occur.
Ultimately, a small business loan provides startups and small and medium-sized businesses with the extra capital they need to manage costs and succeed. If your business is struggling to manage daily costs or needs a cushion of cash for the unexpected, try researching the options above. Just make sure the option you choose takes both your short- and long-term needs into consideration.
Michael Hollis is a Detroit native who has helped hundreds of business owners with their small business loan solutions. He’s experimented with various occupations: computer programming, dog-training, accounting… But his favorite is the one he’s now doing — providing business funding for hard-working business owners across the country.