It’s quite understandable why most small business owners still look to traditional lending institutions to provide them with needed funding for business growth. There is no question that the best interest rates are always available from banks and credit unions. The problem is that all those institutions turn down the vast majority of applicants, and only those with a strong company history and a good credit record are generally approved. Alternative financing offers a viable option to many business owners, and the higher interest rates can directly be tied to the fact that approval rates are much higher, which means a greater risk of loan defaults. Here are some alternative financing options which you might want to consider.
In this scenario, a business owner would sell some or all of the company’s monthly invoices, for an amount equal to about 80% of their face value. Then the factoring company would collect on those invoices, after which it would remit the remaining 20% to the business owner, minus its factoring fee. The big advantage here is that there’s no waiting for invoices to be paid, and you get upfront cash for them instead.
Merchant Cash Advance
Merchant cash advances are a form of alternative financing which works well for companies that have a high volume of credit card sales. An alternative lender would supply a business owner with an upfront amount of cash, based on the historical volume of credit card sales, which are anticipated to be similar in the near future. Then, the owner pays back the cash amount, by sending a percentage of those credit card sales to the lender each month.
Just like they sound, these types of loans are based on the market value of assets owned by a business, and the assets serve as collateral for the loan. If the loan is defaulted on, the alternative lender would have the right to seize the asset and sell it in order to recoup his/her investment.
Would your company benefit by alternative financing?
If your business is like most small businesses and has been denied approval for a bank loan, you might want to consider alternative financing as a way to secure the funding you need. Contact us at Norus Capital so we can discuss some possibilities which might provide you with the funding you need to get to the next level.