From unexpected expenses and cash flow gaps to new opportunities and growing pains, there are so many reasons why a business might need quick cash. In these situations, waiting weeks or even months simply isn’t possible. Due to their requirements and processing times, traditional lenders will not be able to meet your immediate needs. So, where should you turn?
The answer is alternative lenders. While these lenders often have higher interest rates and fees compared to traditional options, they are much easier to qualify for. You won’t run into the stringent credit, documentation and collateral requirements. In fact, these lenders are known for their fast, simple and hassle-free application processes, which can be completed online in a matter of minutes.
If you need to generate cash quickly to cover day-to-day costs like payroll, these alternatives to the traditional bank loan will help you find an option that is right for you:
- Line of credit
Some business owners like to use a business line of credit as a safety net for when they find themselves in tight cash flow situation or in a business emergency. The process involves a lender extending a credit line to you with a predetermined credit limit. You are then allowed to withdraw cash as needed. You also enjoy full control over what the funds are used for. Another big advantage is that you only pay interest on the portion of funds you use.
- Merchant Cash Advance
Essentially, a merchant cash advance – also known as a business cash advance – is a sale. It is not a loan. The lender is purchasing your business’ future credit card sales at a discount and providing you with a quick lump sum. Because you can have cash in as little as 24 hours, this solution has become a go-to option for short-term business needs. Repayment is also hassle-free, with payments automatically taken from daily or weekly credit and debit card transactions.
- Invoice factoring
Similar to a cash advance, invoice factoring is not a loan. It is also a sale. In this case, you are selling your business unpaid invoices to receive a fast infusion of cash. Depending on the lender, your business can receive up to 90% of an invoice’s value, and the factor takes over the collections process. Another advantage is that factoring companies are more concerned with the creditworthiness of the borrower’s customers, making it much easier for those with poor credit to be approved.
How to Choose the Right Lender for Your Business
Choosing the right business funding type is not the only challenge business owners face. It’s also important to pick the right lender. If you’ve already been searching you know just how hard it is to narrow down the many options.
The key is to research how much the lender understands your business type and industry. Online businesses, for example, have a different set of challenges and needs than a brick-and-mortar. In addition, some industries (like the travel industry) are considered high risk due to high chargeback rates and need a provider that has experience in managing this hurdle.
At First American Merchant, our team has years of experience at helping merchants considered high risk. Our cash solutions are tailored to meet each industry’s unique needs, and we are committed to providing the support merchants need to succeed. If you need fast cash, we can help you quickly secure the business loans you need to cover expenses, boost cash flow and grow.