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Where Businesses Can Turn for Capital – And Which Option is Right for You

Moving into the second half of 2020, so many business owners are in need of extra working capital. It has been a tough year, to say the least, and now we’re moving into the bustle of the holiday season. If you’re planning on launching a business soon, you are in even greater need of sources of financing.

So, where’s the best place to find additional working capital? And how do you know which one is right for your business’ unique needs? Here are some of the top sources of small business financing, along with important questions you should ask to determine which source is right for you.

Top Small Business Financing Options:

  1. Business credit cards – An increasingly popular business financing option, credit cards are often business owners go-to option. However, only a few credit cards are available for fair credit. Most require that the business owner have good or excellent credit for approval.
  2. Merchant cash advance – A merchant cash advance is essentially a sale, not a loan. The provider purchases your future sales at a discount in exchange for an advance of cash. This options is known for its speed – cash in hand in as little as 24 hours – and a simple, painless application process.
  3. Crowdfunding – This option allows you to tell your brand story and seek funds raised by a large number of supporters via an online platform. Crowdfunding is often used when money is needed on short notice. Some campaigns have helped businesses raise the funds they need in a matter of days.
  4. Receivables financing – Also not a loan, receivables financing allows a business to sell its unpaid invoices in exchange for immediate capital. The provider then works on your behalf to collect on the invoice for your business, so you can get back to doing what you do best.
  5. Line of credit – This traditional financing option is typically used for short-term arrangements. It provides a specific amount to the business and has the potential to be renewed. Unfortunately, this option can often be challenging to qualify for and takes time.
  6. SBA loan – These loans are guaranteed through banks and other financial institutions. As such, the terms are often very attractive with low interest rates and favorable repayment terms. This also makes them incredibly competitive and hard to secure.
  7. Microloan – These traditional loans are available to small businesses for $50,000 or less. They too are challenging to qualify for and involve a long approval process and wait times.

What Options is Right for Your Small Business?

Now that you have some idea of the merchant funding available to your small business, you will need to sort out the why. Here are a few key questions you need to ask that will help you determine your next move:

How much do I need?

The option you should apply for will largely depend on how much cash you need. Make sure you crunch the numbers to determine the exact amount you should borrow to accomplish your goals.

How fast do you need funds?

Most, if not all, traditional funding options involve long wait times for funding and complicated documentation requirements. If you need fast funds, your best option will be an alternative financing option like a merchant cash advance – cash in less than 24 hours.

How quickly can I pay the funding back?

Do you plan to pay back the money in the short-term (less than 24 months), medium-term (2-5 years) or long-term (5+ years)? Your answer will significantly narrow down your options. Be sure to also consider options with flexible repayment terms, like a cash advance.

What’s my industry categorized as?

Is your industry or business type considered high-risk? If so, traditional lenders will not want to partner with you. An alternative high-risk provider, on the other hand, will specialize in working with your business type and be able to offer tailored services that meet your unique needs.

If you’d like to learn more about a merchant cash advance and small business funding, contact our team of experts at First American Merchant. We’re here to help you unlock working capital and ensure your business is at the forefront of change.