Guide to Business Financing Options 

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Guide to Business Financing Options, the easiest and fastest way to obtain working capital.

You might think ‘am i the only one, stressing over my financials’ well guess what, An Intuit QuickBooks survey found that 69% of business owners are constantly stressed over cash flow issues. The report also found that business owners with cash flow struggles fall behind on payroll, lose opportunities for projects or sales, and miss deadlines for vendors, invoices and contracts.

While Running a business there can be a need for working capital for multiple reasons:

• Customers aren't paying on time.

• Unexpectedly business slows down.

• You made an investment that used up most of your cash.

• Equipment breaks and needs repairs.

• Your business is drastically growing and you don't have the funds to keep up.

• You get paid on Net 30-90 clients.

Even a highly profitable business can have its cash flow dry up. 

For example, a business owner of a construction company that has been expanding rapidly. He just hired six new employees and bought a new truck as he has several jobs lined up. But in the meantime, his biggest client payments  aren't due for another 2 weeks. Even though his accounting statements show his business is very profitable. But his bank account is dipping dangerously low, maybe even into the negative.

In times like these, it’s obvious to ask for help. Online lenders that offer Small business financing, can help you borrow money quickly to cover operating. While taking on debt may seem like a step back, it can often lead to getting you a step head.

What Is Small Business Financing?

When you’re running short on cash and don’t have a month or two to wait for a loan, there are a few small business financing options that can get you funding really quickly.

Small business loans from an alternative lender

When obtaining a business loan fast, banks are not a practical solution. Their application processes will take forever and there's a huge chance of rejection. 

So the ideal option is to work with an online lender. These companies provide small business loans that they can approve and process in as little as a couple hours. Their small business loans range from $5,000 to $5,000,000.

The obvious question is, "what are the terms & rates for loans processed by online lenders"

well the truth is that most lenders cover a wide range of terms, the question is not what terms can we do, rather what would you qualify for, though you might think that 'my credit score is bad, so I probably wont get any decent terms', but in reality you'll be surprised as there are many other factors that predict what type of terms you would get.

Here's some more alternatives.

Equipment financing

If your business needs money to buy a new piece of equipment, equipment financing is a good option. Equipment financing loans are similar to working capital loans in the aspect that they are usually approved easily & quickly rather than a traditional loan. The main difference is you can only use the funds to buy a specific piece of equipment. Also the equipment will be collateralized, unlike working capital loans which are unsecured.

Line of credit

A line of credit lets you borrow whatever amount that you need. The lender sets a credit limit and then you can borrow as much as you need up to that limit. But obviously you need to qualify for the line of credit first before you can use it. 

You typically get a line of credit from a bank, which means a longer application process. A line of credit might not be the solution you need today, but it definitely can be of value in the future.

SBA loans

With SBA loans, you can get approved for upto $500k uncollateralized, (more than that may require collateral) The application process is a bit longer, youll receive.sn answer within a couple of days, but the lending company that actually funds the loan may take anywhere from 30 to 90 days to process it.

Invoice factoring

If your business relies on invoicing clients, invoice financing can be the right solution. This type of loan allows you to borrow against your outstanding invoices, providing immediate funding. 

The lender offering the loan, gives you a percentage of your unpaid invoice upfront. Then, they take on the risk of collecting payment from your client. Once the client pays the invoice, the lender will send you the rest of the money minus a fee, typically 2% to 6% of the total amount.

Benefits of Small Business Financing

Small business loans from alternative lenders have several advantages compared to banks, which is why they can be a better fit when you need working capital.

1. A quick and easy application

Alternative lenders offer a much faster loan application process. They may simply ask you to fill out an online application, and ask for the last 3 month bank statement. That’s it.

Banks on the other hand have a longer and more difficult process, they may want to see a formal business plan, proof of collateral, your credit report, your tax returns, a profit & loss sheet, a strategy for how you’ll use the money, and the legal documents for your business.

2. Fast loan funding

Since alternative lenders aren’t basing their approval over a thousand documents, they can decide on your loan application quickly. You could have your loan approved within 4 hours of applying. banks take several weeks or months before they approve a loan.

3. Flexible with credit scores

Alternative lenders aren't really basing the approvals off of your credit score. Their decision is more based on whether your business has been earning revenue, Banks obviously have tougher standards.

4. No prepayment penalties

You can pay off a loan from an alternative lender as early as you want without penalty. Banks typically charge a penalty when you pay early, like 3% of the loan amount if you pay within five years. Since they put in so much time to set up the loan, and you won't be paying all that interest, they need to collect a minimum amount of fees to justify that work.

Another reason to pay off these loans early is because they may have a higher interest rate than bank loans. However, by paying the loan off quickly, you could end up paying less in total interest than if you took out a long-term bank loan.

5. Daily repayment schedule

A bank's business loans use’s a monthly payment schedule, where you owe a large payment each month. An Alternative Lenders loan may follow a daily or weekly repayment schedule, where you cover a little each payment as you bring in revenue. Payments that are split up are easier to handle. You won’t reach the end of the month and realize you’re short of the large payment due.

6. Short-term nature

By design, small business loans from online lenders are meant to last for a shorter amount of time than bank loans. You get funding quickly to cover your working capital needs and then pay it back quickly as well. This will get your business out of debt sooner.

7. loan amounts available

With an Online Lender, you can take out business loans as low as $10,000. Traditional lenders may not offer these smaller sized business loans because they won't work for 2 months for a $10,000.00 loan.

Ways to Use Small Business Financing

So now you know how to get a small business loan. What are some ways to put that money to good use?

1. Handle cash flow problems

If your cash flow dries up or you deal with an unexpected emergency, short-term cash flow loans can keep you going. Ideally, you would have your own emergency fund to cover a couple months expenses. But if you haven’t built up these savings, a working capital loan can be your backup.

2. Provide working capital 

Your expenses keep coming, even if your sales slow down. A working capital  loan gives you the funds needed to continue running your business smoothly.

3. Restock inventory

There can be a deficit between when you make a sale and when you get paid, but during this time you still need to restock. Working capital will let you restock and continue operating.

4. Upgrade and replace equipment

If a key piece of equipment breaks down, equipment financing lets you purchase a replacement or an upgrade with no money down. The lender also helps you negotiate for the best price and qualify for the maximum possible tax benefit as the result of your investment.

5. Protect your business and personal finances

Above all, small business financing keeps both your business and your personal finances safe. On the business side, you won’t have to raise cash by selling shares or equity of your business to other investors, which can mean losing control of your company. And your personal savings will also be safe, as this is strictly a loan on the business.

When It’s Worth Taking Out a Loan

Figuring out whether your small business should borrow depends on your personal situation, but these scenarios are good examples of when it makes sense.

If you have an opportunity

Say there are some big contracts that you can take on, and they can potentially double or triple your revenue, but you don't have the funds to cover the expenses of the projects. Obviously in such a situation a  business loan is a really good idea.

During a cash flow emergency

When your cash flow dries up and you need to cover bills, this is usually the right time to obtain a business loan. 

When you have a gap in funding

Other small business financing options take time to set up, like qualifying for an SBA or Bank loan. You could use a quick short-term loan to cover what you need during this gap.

When you’re confident you can pay the money back

The loan specialist will help you analyze your financial situation to make sure you borrow an appropriate amount, as they want to ensure you can pay off the debt as well.

For a profit 

When you have a clear strategy for investing the loan, remember borrowing money has a cost, the loan interest rate. If you’re going to use a business loan, make sure there’s a clear way for you to gain more than you pay for the debt.