Commercial financing from traditional banks isn’t for everyone: While they may offer attractive terms, many businesses have trouble finding a traditional bank willing to work with them. However, businesses may have better luck with the following six financing options.
Lines of Credit
A business line of credit is one of the more flexible commercial financing options out there. It gives borrowers access to a set amount of money. Borrowers can withdraw money up to that set amount but do not need to: They can withdraw what they need as they need it, leaving the rest available for later. Monthly payments from the borrower restore the amount of money available over time.
The US Small Business Administration (SBA) is a government entity that works with lenders to facilitate commercial financing agreements. As the organization puts it, the SBA “reduces the risk for lenders,” which in turn makes them more comfortable providing funding for businesses. These loans can be very helpful, but the application process is not the speediest.
Invoice factoring involves the borrower selling uncollected invoices to a lender. This allows immediate access to funds from customers who have been slow to pay. Fees collected by the lender for this service will vary, though 1% to 4% of the value of the invoices is typical.
Unsecured Business Loans
Unsecured business loans do not require the borrower to designate any of its assets as collateral. That is a nice perk, but it often comes with a trade-off in the form of higher interest rates.
Equipment financing, as the name suggests, is specifically used to facilitate the purchase or renting of equipment. In most cases, the equipment itself serves as collateral.
Merchant Cash Advances
Merchant cash advances are a form of commercial financing in which a business receives a lump sum of cash from a lender. The borrower repays that by giving the lender a percentage of its credit card and debit card transactions going forward.
To learn more about your financing options from a professional in the industry, just reach out to Emerald Valley Financial Services.