There may come a time when money may be low for someone starting up a business, or there’s a financial deadline/investment that needs to be made. On top of which, an individual must try to avoid hurting their credit score, or worse, putting the business in financial jeopardy!
The last thing anyone wants to do is get aloan. Many lenders try to avoid giving loans to people that may not be able to pay them off and are very picky with small businesses.
Traditional loans from a bank may not be an option for some business owners. Credit analysts from banks consider dozens of strict requirements and often end up denying someone approval for a loan.
Luckily, there are several alternative funding options available for small businesses. For people that need cash as soon as possible, here are some quick funding options to consider:
- Check Online: The internet could compile a comprehensive list of available alternative funding options online. Plus, it could help with handy loan comparison to check out what may work for someone,and what may not!
- Browse Locations: For those that are more old-fashioned, it’s always a good idea to find places that have labels like“quick funds” or have “need cash?” signs. By visiting these alternative funding stores, an inquirer may speak with a real-life person and can ask questions about funding options to get a more personal understanding of what they are looking for.
- Ask a Friend: Always keep friends close!Social media and mobile devices let us know what people recommend. Who knows!Maybe some friends have their own small business and are looking for alternative funding options as well! It’s always better to search together!
- Research: Research will be the cornerstone of all these searches. Being informed and knowledgeable about loan terms, interest rates, benefits, set-backs and loopholes could only benefit you.
Overall, searching for alternative funding depends on how much funding someone needs, how much time they have before reaching that financial deadline, and the convenience they are looking for from an alternative funding option. As a business owner, this decision will be critical to the company’s finances and an individual’s economic stability.
Types of Alternative Funding Options
After narrowing the search, maybe the decision has reached a stalemate between alternative funding options. If so, know that that’s okay!
Comparing and contrasting is what makes researching quick funds much more manageable compared to traditional loan searches (auto loans, home loans, etc.).
However, what are some types of alternative funding options available out there? Here are a few, along with some general advantages and disadvantages.
Unsecured Business Loan
An unsecured business loan is a short-term option for quick cash that could be used for most business expenses. Because it is unsecured, there is no collateral required, which is safer for those looking to avoid financial risks.
- Advantages- Simple inquiry process. No security.
- Disadvantages- High interest rates. Usually requires repayments in less than a few months (3-12 months). Personal guarantee with the loan may be required.
An invoice finance, or a debtor finance,allows someone with a small business to obtain quick funds using their accounts receivable ledger as collateral. Like unsecured business loans, these quickfunds could be used for almost any business-related expenses.
- Advantages- Simple inquiry process. Great for overcoming cash shortages and providing a longer-term solution with a sustainable cash flow.
- Disadvantages- Could only provide a person with a percentage of the total invoiced amount. Designed as a support cash flow rather than just quick funds for a single one-off purchase or clearing off a single piece of debt.
Line of Credit
A line of credit is quite similar to using a credit card. A person with a small business could use a line of credit to pay for most expenses. A person with a line of credit will receive a limit of quick funds available to them based on several factors.
- Advantages- Simple inquiry process. Access to quick funds is very flexible for a small business that may need cash at a moment’s notice.
- Disadvantages- Regular payments are required.Fees are a part of most payments. The entire line of credit is repayable on demand!
One of the more common financial consumer products out there, a personal loan comes in a variety of forms, as well as different types of lenders. One example could be a title loan.
Title loans are usually a secured personal loan that offers quick funds based on the value of one’s vehicle. The security of the loan is achieved by using the vehicle’s title as collateral. Like most personal loans, they tend to be available everywhere. Whether through a store or online, you could acquire title loans in Fresno, Tallahassee, and so many more cities across the nation!
- Advantages- Make payments in installments over the loan term. Easy inquiry process. Great communication outlets. Could bere paid early without prepayment penalties. Most personal loans may be used for almost any situation!
- Disadvantages- A single person will be responsible for the repayments. Interest rates may vary, depending on the typeof personal loan acquired.
With all of these types of alternative funding options, a person could pinpoint what they are looking for when it comes to quick funding.
What to Expect from Alternative Funding Options?
When the search for alternative funding has ended, and a person is ready to make a financial decision, what should they expect?
Expect any of the following:
- Repayment: Alternative funding options all have one thing in common—they come with a contract. Make sure to carefully go through the contract before signing, especially as it all comes back to what repayment will be like. Pay attention to terms and be aware of any fees.
- Responsibility: As a business owner, that individual must be responsible for handling the alternative funding retrieval and repayment. They must be responsible in setting repayments on time and remain diligent to avoid paying any penalty fees.
- Risks: There will always be risks when obtaining an alternative loan. Keep an eye out for high interest risks or hidden fees when making the decision to work with a lender or loan type. Never be afraid to ask questions about these risks to a lender!
Always remember, the journey is just as important as the destination, maybe even more so. Find the time to research alternative funding options and make an educated decision that will benefit the business,and the wallet!