Some Ideas for Alternative Commercial Financing

When most people think of alternative financing, they think of it as capital coming from alternative lenders such as those that reside online or are not traditional banks. That definition tends to limit the number of options available to a business. 

Because smaller businesses often have difficulty getting traditional financing, they often turn to alternative funding means. Here are some of the alternative business funding options available to companies. 

Business Term Loans

This type of loan comes closest to what many people consider a traditional loan. A business receives a fixed sum of money and then pays that money back over time. 

The benefit of this type of loan is that it funds quickly. The downside is that interest rates are generally higher than a traditional loan, plus the payback period is often relatively short, ranging from 2 to 5 years. 

Lines of Credit for a Business

Having a line of credit for your business is an excellent idea whether you need financing currently or not. These are a great fallback in case of shortfalls in your cash flow. 

When you find yourself in a situation where you need cash in a hurry, you may often find nothing but high-interest rate financing options available. A line of credit is generally readily available for businesses in the alternative funding market.

Equipment Loans

An equipment loan is a fantastic financing vehicle for companies that may not have any assets on their books or a fluctuating cash flow. In this type of loan, the lender will advance up to 100% of the value of the equipment you would like to purchase. The equipment itself serves as collateral for the loan, and you pay back the loan over time.

Invoice Financing

If you are a business that has trouble with late-paying customers, invoice financing may be a great option. In this type of financing, a lender would loan you an amount that is equivalent to about 50 to 90% of your outstanding invoices. 

When customers pay off their invoices, you receive what is remaining less any fees owed to the lender. In this type of financing, a lender will generally charge a flat percentage rate for the advanced amount and then another amount every week for outstanding invoices.

While many businesses struggle to receive traditional bank loans, these alternative financing methods offer a great way to get the financing a company needs. It is always vital that companies shop around to various lenders and a wide array of loan types to ensure they are getting the best rates for their needs.


Related Posts