Innovation in the industry of financing and lending are being lead by a variety of options that make up its development and prevalence.
Today is called the “Golden Age of Financing” as interpreted by the same article namesake in Hufftington Post, because entrepreneurs gain more flexibility in choosing the appropriate structured solution for their unique needs.
This is rather a welcoming advancement for entrepreneurs that deal with time pressured and demanding environments, which most of the time needs faster and smarter solutions in order to keep up with the pace.
Despite these latest developments, it actually introduced newer dilemmas such as making the most appropriate choice among a variety of options. These include reformed bank loans, SBA (Small Business Administration) loans, and non traditional financing options like online lending, merchant cash advances, angel investing, crowdfunding and venture capitalism.
A sound comparison and evaluation of all viable options within reach is important when making a decision about the best funding to take. Whichever purpose, it will serve, here are the three basic capital funding options that will help your business achieve its goals:
- Installment Loans
Typically, loan repayments are made flexible by dissecting it into a fixed installment payment within a certain period of time. Some businesses choose this kind of repayment scheme, for them to have better management of their cashflows.
Installment loans were made more sophisticated by offering it online, and with more lenient eligibility requirements and in the absence of collateral.
- Sales Performance Loans
Repayment for these kind of loans were made flexible by enabling a daily percentage of credit or debit card sales to be deducted by the loan provider until the loan amount and its corresponding charges has been repaid. This is the choice of businesses which tend to be subjected to both lean and peak month cycles. The flexibility of payments makes it easier for them to manage their cash flows regardless of what business exposure they were into.
It is important to evaluate the overall and long term needs of a business when choosing its sales performance loan provider. In the absence of stricter eligibility and requirements, it actually imposes higher interest charges and harsher penalties in order to compensate with the risk.
- SBA Loans
SBA or Small Business Administration loans offer competitive rates and longer repayment terms in order to accommodate the needs of small businesses when it comes to affordability and flexibility. However, the process and requirements are almost the same with that of traditional bank loans, which can be time consuming and tedious for some.
Recognizing some of the agony of small business owners about the processing system, SBA loans are extending the application online.
With many third party solutions that businesses can avail these days, it is still important to come up with its own long term goal setting and business planning which will utilize its own resources and skills. Not only that this is a cost efficient option, but it will be more tailored fit to the needs and goals of your business. Nonetheless, with careful evaluation, a business may find some useful business tools and third party support from the market today.
Bank Financing 101
The basic go-to place for funding solution is still a bank. It serves as one of the most secured and trusted financial institutions, which not only lends money, but can also aid in providing loans for higher credit scores, which are essential for most businesses. However, small businesses are having a hard time securing loans with them ever since a major economic crisis struck the worldwide economy. Yet currently, banks are in the process of recovery and restructuring of their loan programs in order to cater to more small businesses today.
Meanwhile, it doesn’t hurt for a business to still try availing loans from banks ,which is basically because it is the safest zone, credit score and low interest charges wise. Here are the five C’s to remember, according to a small business funding article from huffpost.com, which are used by banks in their loan process:
- Capacity
The capability to pay back the loan.
- Collateral
A business asset or assets that a bank as guarantees of repayment.
- Character
This implies to the credibility and elements that your business holds which signifies its level of trustworthiness and sense of authority within its industry like credit histories, education, character references, and business experience.
- Conditions
Banks consider certain economic conditions as influencing factors with how the loan will push. This means that they will have to evaluate some associated elements in your business like competition and economic indicators like equipment and inventory prices that tend to fluctuate.
- Capital
Banks assess both the net worth and equity of a business to make a sound evaluation of your credibility.
These five considerations are valuable to know in order to make the necessary preparations, or to make an initial evaluation if your business will qualify. Nonetheless, when situations come that a traditional bank loan is not viable, there are a lot of alternative options out there, especially with the growing industry of finance and lending.
Small Business Trends
One of the biggest trends in small business ownership today is the rise of alternative and newer funding solutions. As banks become tighter in granting loans to small businesses, sulking down in the corner isn’t an option for small businesses. Instead, they actively look for other ways to meet their needs.
Here are some of the ongoing and newer alternative funding solutions for businesses to avail. Each differs in eligibility requirements, thus it is encouraged to do more exhaustive research before seeing it as the best solution for your needs:
- Peer to peer lending
This is another coined term that refers to a certain pool of investors that operate within a specified industry. It offers competitive rates, and is viable for small businesses that seek an alternative funding option to support their growth.
- Crowdfunding
Crowdfunding is an online based lending platform, that encourages both investors and startup entrepreneurs to collaborate over a business idea by incorporating both financial and management support.
- Merchant cash advances
These have been around the business for a long time, but newer merchant cash advance loan providers are incorporating some improvements over rates and application process online.
A small business must be updated with the trends in funding options to be able to maximize its potential for business success and growth.
Reasons to go for Merchant Cash Advances
If it were only that easy to seek additional funding and capital for an entrepreneur’s idea, businesses don’t have to compromise the stability of its cash flow and future growth for a loan. But debt has become an inevitable part of operating a business. But not all business debts are created equal, and some can actually more beneficial than just being a liability.
There are some business needs, however, which entails an aggressive and immediate solution, which makes the traditional bank and small business loans as lamer options for the situation. Therefore, businesses, particularly the small ones, go to more accessible and faster funding solution providing services, such as merchant cash advance services.
A merchant cash advance service is a kind of lending option wherein the same merchant that processes your business’ cashless transactions can give you a portion of your future sales receivables as a lump sum today.
Merchant cash advance services are becoming popular short term funding solutions, that eases businesses from having to be subjected to tedious and time consuming approval process that a bank loan asks for. It is also a viable solution for businesses that seek fast cash arising from opportunities that must be given immediate attention in order to maximize.
A merchant cash advance loan provider is also a go to for businesses that have low credit scores, and needed more help in order to bounce back and improve on what they have become.
Advantages and Disadvantages of Getting a Merchant Cash Advance
It is typical that businesses will get attracted to solutions that are easily attainable and realistically practical. In a scenario where convenience and simplicity is highly favored over cost, a merchant cash advance company is the best option.
A merchant cash advance is not a fancy option type of business solution, but in reality it places itself as one of the higher interest yielding product. So one must be cautious when getting one.
Small business loans from SBA are almost similar in the eligibility requirements with that of a traditional business loan, only that it may only ask for smaller interest. That is why compared with small business loans, some business may still opt for a merchant cash advance instead because of its minimal documentation requirements.
Getting a merchant cash advance service may not negatively impact your business cash flow since it only takes a portion of your daily credit and debit card sales, which will be only minimal if sales did not take off that well for the day.
Merchant cash advance firms are not the best partners for everybody, and a borrower who wishes to avail one must be well informed of its potential positive or negative impact on you business in the long run.
Points to Consider Before Getting a Merchant Cash Advance
In a availing any debt-implying financial product, a business owner must be wary of all the pertinent fees and risks involved with it. One must be a well informed customer, in order to digest all the clauses stipulated in the contract in order to maximize its benefits. Below are some important points to consider before getting a merchant cash advance loan provider, or with any loan provider:
- Insist on knowing all basic, pertinent and associated fees upfront with the loan.
- Make sure to have a clear understanding of all the terms and conditions stipulated in the contract.
- Insist an accurate projected APR (Annual Percentage Rate) for the loan.
- Compare all available funding options before settling with one.
The best merchant cash advance services can only help you reach the business growth you need, if you are wary of how to utilize it appropriately. Getting a merchant cash advance is actually riskier than other funding solutions, but if supported by a strong sense of purpose, may be worthy after all.
To know more about how things have evolved with the merchant cash advance industry, check out CrowdReviews.com’s merchant cash advance reviews.
John Tovar
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