A bank business loan is one of the most popular financing options for startups and small businesses. However, they are not always easily accessed, and the loan conditions discourage many from pursuing business loans.
If you’re considering borrowing money to fund your small business, there are many alternative lending and funding options to explore. This article suggests four popular flexible lending options to fund any small business or startup.
Peer-to-Peer (P2P) Lending
P2P lending is an alternative to bank loans where private investors or individuals lend directly to businesses. These loans are usually delivered through an online platform that matches and connects borrowers with lenders with similar goals.
With P2P lending, your business can access large capital despite a limited credit history. The loan terms are usually flexible and satisfactory to both parties. Some P2P loans offer lower interest than traditional banks and provide faster approval and processing, allowing you to access funding faster.
Asset Financing And Refinancing
Asset financing and refinancing are versatile financial tools. They allow businesses to leverage the cash value of their assets to fund the purchase of new assets or to access cash.
With asset financing, a business can acquire or lease a property without paying a large upfront cost. Asset refinancing allows a business to use its existing property or equipment to access cash through sales or leases.
Asset financing allows your business to preserve its working capital while accessing the necessary equipment to facilitate operations. This loan option permits a flexible repayment option, allowing small, regular payments over a long period. It is an excellent option for businesses looking to improve their credit score.
Merchant Cash Advances (MCAs)
You can get a merchant cash advance to fund your small business if you’re running a merchant business and offering credit card sales. With MCAs, banks and financial institutions offer you a large sum upfront in exchange for a percentage of your future credit card sales.
A merchant cash advance allows you to access large capital quickly without traditional collateral. Repayments are usually deducted automatically from credit card sales, offering flexibility and peace of mind, even if your sales and income fluctuate. You can access MCAs with little credit history and a less-than-ideal credit score. The process is transparent, convenient, and comes with low risk.
Payday Loans
A payday loan is a short-term loan that individuals can take to repay on their next payday. This loan is usually offered to individuals, not businesses. You can access this type of loan if you have a job besides your business or startup.
Payday loans are not popular funding sources for businesses, but it is a simple and effective way to raise capital for emergency expenses in your business or startup. These loans can also help you maintain cash flow and stabilize your business. While not a popular choice, there are many benefits of payday loans, including convenience, fewer requirements, no debt trap, and a simple repayment strategy.
Endnote
Business loans from the bank are not easy to access, and they come with so many requirements, from high interest to collateral requirements. If you want to fund a small business or startup, you can explore other lending options like P2P lending, asset financing, merchant cash advances, and payday loans.
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