- April 25, 2019
- Posted by: mcg_admin
- Category: Uncategorized
If you are running a small business and you need an alternative source of funding due to bad credit, or you would simply prefer to avoid traditional bank loans, you’re in the right place. In this guide, we’ll discuss how you can choose the right alternative source of funding for your business and explain your top options for funding your company.
Figure out How Much Capital You Need (and Why You Need It!)
First things first, you need to make sure you know how much money you’ll need when applying for alternative sources of funding. Take a deep look at your financials and determine how much money you really need.
Additionally, you must make sure you know why you need this money. There are many good reasons to seek an alternative source of funding for your business – renovating your business, hiring new staff, or purchasing new equipment, for example.
However, there are also some bad reasons to seek alternative business funding. As a rule, you should not try to take out a business advance for any purpose that will not result in improved profits for your business – you shouldn’t try to get an advance to fund a company retreat, for example, or to purchase a new company car.
Understand Your Options for an Alternative Source of Funding
Next, it’s a good idea to know what options you have for an alternative source of funding.
- Unsecured lines of credit – This is usually one of the most high-cost types of alternative funding because your line of credit is not secured by any collateral.
- Asset-based lines of credit – If you have any valuable assets such as vehicles or heavy machinery, you can use an asset-based line of credit to get a better rate than you would with an unsecured line of credit.
- Merchant cash advances (MCAs) – A merchant cash advance is not a loan. Rather, the MCA provider purchases a percentage of your future sales for a lump sum payment, and you repay based on their conditions until the agreement has been fulfilled.
- Invoice financing – Invoice financing involves the purchase of your outstanding invoices by a third party. They’ll usually pay about 80% of the value of the invoice. Then, when they get paid by the client, they will pay you the remaining percentage of your invoice value, minus applicable fees.
Each type of alternative funding has different pros and cons, so we recommend diving a bit deeper, and doing some research to see what rates you can get for each type of business cash advance.
Get Quotes from Multiple Funders – and Make Sure You Can Afford Repayment
Once you’ve decided which alternative source of funding is right for you, it’s best to apply with a few different funders, to make sure you get the best possible rate.
Lastly, and perhaps most importantly, you need to make sure you understand your repayment terms completely – and that you can afford the monthly repayments or other costs associated with your business advance. If you can’t, you risk putting yourself in an even worse financial situation – and you shouldn’t take the cash advance.
Follow This Guide – Get the Alternative Funding Your Company Needs!
With so many online companies offering alternative sources of funding, you’re sure to be able to get the cash you need at your business and ensure that you have enough working capital to keep expanding and growing. So, follow these tips, and start applying today!