Business Loan Alternatives That Help You Avoid the Bank

Business Loan Alternatives

If you’re ready to start a business or to expand a current one, one of the first things to do is to secure financing. Unfortunately, doing so through a bank means lots of hoops and lots of hassle. Luckily, you do have some alternative options to securing a traditional business loan.

Lease Your Equipment

Equipment is often one of the biggest expenses for a business owner. If you need new equipment, but would prefer not to take out a short- or long-term loan to get it, consider leasing what you need instead. In addition to leasing equipment to produce your products, you can lease company vehicles, computers and many other items you might need to run a successful business. The lessor will create a repayment plan that matches your company’s needs. These plans are often more manageable than those of a traditional loan.

Get a Working Capital Advance

Also referred to as a business cash advance or a merchant cash advance, a working capital advance is a type of short-term business loan that allows you to get cash fast, sometimes even within hours. Instead of paying a fixed monthly fee, which can lead to further financial issues if your business has low earnings one month, you pay back a working capital advance by giving your lender a percentage of your revenue each month. Keep in mind that most lenders will not approve a working capital advance for a company that hasn’t been established for a certain period of time.

Use Invoice Factoring

Because invoice factoring is not a loan, you don’t have to worry about a repayment plan. When you use this method, instead of sending your invoices to the client, you will send them to the factoring company. The company takes a percentage and pays you the rest of the invoice, and then contacts the client for payment. Invoice factoring is usually a good choice for companies who are in business to business (B2B) sales and don’t like to wait for the other companies to pay invoices.

Try an Asset-Based Loan

Perhaps you run a company that uses particularly valuable equipment. If so, you can try to obtain an asset-based business loan. This type of lender will give you money based on the worth of the assets, which you then pay back over time. Though similar to a traditional loan, asset-based loans usually have lower interest rates that lead to lower payment terms. This alternative is good if your business needs cash to pay employees, expand, remodel or purchase new equipment.

Securing financing for your business doesn’t need to include lots of paperwork, a lengthy wait time or high interest rates. An alternative business loan could help you get — or keep — your business booming.