As an entrepreneur and small business owner, you know that cash is like oxygen for your business. Without cash you cannot keep the wheels turning. You need cash to purchase materials and supplies, pay employees and cover your monthly operating expenses. As important as cash is, it’s difficult to come by for small businesses, especially in the beginning.
Most banks aren’t interested in small business loans. Your chances of qualifying are less than 20%. Even if you are able to qualify, the application and underwriting process takes months. A bank loan is completely off the table if your business is new or struggling or if you only need a few thousand dollars. The old saying that banks only want to loan you money when you don’t need it is true.
Fortunately, there are other non-traditional lenders out there that do provide financing for small businesses and entrepreneurs. While these non-bank lenders are only a small fraction of the overall lending market, the total amount funded by these sources grew by more than 100% last year.
Short-Term Installment Loans
A short-term installment loan is one of the quickest, easiest sources of funds for a small business owner. The application process takes minutes and approval is almost always instantaneous. The one drawback is that these loans will be more expensive; however, given that the alternative may be closing your doors, the cost is worth it.
There are a number of companies that allow to you apply online. If approved, you can literally have the funds in your bank account the same day. Many lenders don’t have any special credit requirements either. Using the lender Max Lend Loans as an example, the only requirement is that you have a regular source of income.
These short-term installment loans are the quickest way to get funding in an emergency situation.
Merchant Cash Advances
If your business accepts credit cards and does consistent volume, a merchant cash advance lender will give you an advance on future credit card sales. They will project what you expect to collect over the next 12 months and will give you a loan based on that amount. They then take a portion of your credit card sales each month to repay the loan.
There is a small underwriting process. It’s slightly different from what you would see at an installment loan company like Max Lend Loans, but considerably easier than what you would experience at a bank. Even with the underwriting process, approval is fairly easy and funding is quick.
Curing Cash Flow Problems
These type of funding sources are perfect for getting through a rough patch in your business, but they shouldn’t be used as an ongoing source of capital. They should only be used to get you to the point where you can fund your operations out of your ongoing cash flow.
As an entrepreneur, that is exactly where you want to be. You want to have control over your business. But until you can get to that point, look into these alternative sources to get the capital that your business needs.