Small business owners across the country understand both how important it can be to have financing available and how difficult it can be to understand the multitude of options. These three relatively common financing options span a range of needs and features and are a good place to start looking for your next business loan.

1. Asset Based Loans

Many lenders offer a variety of asset based loan products to small or mid-sized businesses. These are loans secured by a business’s collateral. Depending on the lender, these assets can include inventory, equipment, property, or even account receivable and outstanding invoices.

Generally reserved for short-term cash flow needs, these loans are often smaller than typical bank loans and have much shorter terms. If you are looking to make payroll or restock inventory through a financing option, this might be right for you. Take stock of your business assets to see how much collateral you have available before starting your search.

2. Merchant Cash Advances

If you take credit card payments, you may be able to access a loan from your credit card processing service provider. Merchant cash advances are smaller loans that are paid off by allowing your merchant to take a small percentage of your future credit card sales.

This type of loan can be done quite quickly, getting money into your hand within a day or two. As such, they are great for emergencies or quick cash flow needs. As they are less regulated than bank loans, you will often see higher interest rates and more risk if you go this route, though.

3. Business Term Loans

These loans are the most common and are products you are likely already familiar with. As with your personal mortgage or auto loan, these are loans that come with a set payment term and interest rate. You’ll pay a monthly bill until the principal loan amount is paid off.

These loans are typically reserved for larger amounts of money and are ideal for companies that need a lump sum for large equipment or real estate purchase, or for general growth and expansion.

Like their personal loan cousins, these loans will vary in available loan amounts, terms, and rates based on your (and your business’s) credit and financial history. If you want to go this traditional route, shop around for a lender that can give you what you need on reasonable terms.

There are many financing options out there for your small business. Take the time to find the right product for your needs, from the right lender, and at the right rates. You’re business will be better for it. 

 

Arthur Sweat