When a bank denies you a business loan, there are many other creative ways to get the financing you need rather than sit down and cry over spilled milk. Why worry when there are several nontraditional funding methods available for you.
Here’s a guide to help you compare the small-business loan alternatives you have:
Receivables based funding tied to cash flow
There are several revenue-based forms for financing you can use to expand your startup. Such lenders are interested in three primary factors; the profitability of a business, its assets, and the owner’s personal assets. These assets are used as collateral to secure the loan. In case you fail to repay the loan, your lender can sell the assets to recover the losses.
Such types of merchant loans have a repayment plan that fluctuates based on your monthly receivables until the whole amount is settled. They are typically structured for repayment over a 5-year span but can be settled much faster if the company experiences faster growth.
So in a month where revenue is low, you repay less, and in high-sales months you pay back more. This way you can easily manage your cash flow.
Credit card offers
Such offers are meant to support small businesses that won’t access traditional funding because they haven’t been around for long.
You can get this type of funding even without collateral. Only, you’ll find it in the form a 9-month zero-interest business credit card; meaning you have a whole nine months of interest-free credit, so you have ample time to work on establishing your credit history.
Again, in this case, a lender will check your personal credit score rather than your business’ credit.
However, this strategy also comes with a range of risks. For one, failing to reach the minimum payments per month on a credit card may lead to higher interest, penalties and eventually damage your credit score.
So you’re putting your business’ life at risk, but failing is not an option, and you’ll have to find a way.
Author bio: As an account executive, Michael Hollis has funded millions by using alternative funding solutions. His experience and extensive knowledge of the industry has become a true asset for First American Merchant, the No.1 Merchant loans provider.