If you have ever considered taking out a business loan but worry that your credit score would cause a traditional lender to deny your application, then alternative funding might be right for you. Below, we’ll discuss the different alternative funding sources available to you and how you can choose the best option to secure your funding.
Decide How Much Capital You Need and Why You Need It
It is important to make sure you know how much money you will need when applying for alternative funding. As mentioned in our Dos and Don'ts article, review your financials and determine how much money you can borrow.
Also, it is important to know why you are borrowing the money and to have a plan for how the money will be used. It is always best practice to use the funds for any purpose that will result in improved profits for your business such as renovating or expanding your business, hiring additional staff, or purchasing new equipment and inventory. You should never use the funds for unrelated business expenses such as personal expenses.
Understand Your Options for an Alternative Funding Source
Below are the different options available for an alternative funding source.
Unsecured lines of credit – Typically come with high variable interest rates but provide the flexibility to borrow up as much as you need, at any time up to your credit limit. With this type of loan, you only pay interest on the amount you use. Also, you do not need to use your personal assets like property as collateral. Funds are available via check or wire transfer.
Asset-based lines of credit – With an asset based line of credit, your business can obtain a line of credit that is secured by accounts receivable, inventory or equipment. You can borrow for working capital, expansion, or acquisitions. Typically you can secure a better rate than you would with an unsecured line of credit.
Merchant cash advances (MCAs) – A Merchant Cash Advance is not a loan. Rather the MCA lender purchases a percentage of your future credit card sales for a lump sum payment, and you repay based on the agreed upon conditions until that amount has been fully repaid.
Invoice financing – Also known as accounts receivable financing, invoice financing is a form of asset-based financing where business owners receive an advance in exchange for their outstanding invoices. Typically, lenders can advance up to 80% of the value of the invoices. The remaining percentage is paid out when your invoices are paid minus applicable fees. Because the invoices themselves serve as collateral invoice financing is often easier to qualify for than other types of small business loans.
Each type of alternative funding has different pros and cons, so we recommend doing some research to see what rates you can get for each type of funding source. ACR Funding has years of experience in providing alternative funding solutions for businesses of all types. Feel free to contact our experts to discuss the business funding option that is best for you.
Get Multiple Quotes – Make Sure You Can Afford Repayment
Once you have chosen which alternative funding source is right for you, it is always best to apply with multiple lenders to find the lowest rates possible. That is what we at ACR Funding do best. Our experts have years of experience with different lenders and we always offer the lowest rates in the industry. Let us find the perfect lending partner for you.
It is also important you fully understand your repayment terms and that you can afford the daily, weekly, or monthly repayments plus other costs associated with the advance. If you can't, you risk putting your business in a difficult financial situation. Only request an amount that you know your business can support repayment of.
Get the Funds Your Company Needs
With many different online companies offering alternative funding sources, it is easy to secure the working capital you need to keep expanding and growing your business. But before you commit to any type of financing, it’s critical that you find a reputable lender. Always do your research and consult a professional to review and discuss your options. Let our experts at ACR Funding help find the business funding option that is best for you.