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Bank Loan or Not: That Is the Question for Small Businesses

Most business need financial help at some time. For small businesses, this can be tricky, because there are many avenues to go down, but not all are right for each company. From bank loans to crowdfunding to merchant cash advances, there are many ways that one can obtain business funds. However, while small business funding options are plenty, you need to be thorough in your research before deciding on one option.

Bank loans are not the best bet for small businesses. It is that simple. Regardless of how long you have been in business, small businesses are not given the best bank loan rates, thanks to the economy, and the financial industry’s labeling many businesses as “high risk”. “High risk” businesses are not necessarily “bad”, but they do have a higher risk of fraudulent charges, tougher federal regulations (i.e., e-cig and marijuana companies), and a higher risk of closing. This leads lenders to jack up interest rates, and demand payments almost immediately, instead of when you and your business can afford it. Because of this, merchants look elsewhere for their small business funding.

One option is crowdfunding, but these social media campaigns do not provide structure for a business. What I mean is that once you raise the funds, there are no set-in-stone deadlines, as there would be with a bank loan or merchant cash advance. The structure-free setting does not help a merchant who has trouble maintaining a budget or business plan.

A third option is a merchant cash advance. This is typically the best option for merchants big and small, who have been in business for at least six months. Many merchants start off fine, but after a few months discover that they have miscalculated how much they need to operate their business. Chargebacks, employees, and equipment can drain a company’s finances if the calculations are off, even in the slightest bit. This is where a merchant cash advance comes in. This is not a loan; in fact, you do not file tax papers with this method. Cash advances are based upon your sales, and repayments are based upon your sales. There are merchant cash advance companies available, such as FAM, to help you obtain the funding that you need for your business.