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Ideally small businesses would immediately have the funding they
desire, and there wouldn’t be any financial issues from helping them succeed. Unfortunately that is rarely the case. At times when traditional banking loans fail,
what are the other options available for funding?
Factoring
This option is great for companies that are looking for a fast
transaction that will leave them with cash in their hands quickly. The premise behind factoring consists of the
company selling their accounts receivable at a discount, giving the company
quick cash without having to wait the normal allotted time that it takes to
gain access to the funds. In this type
of funding the financer is much more interested in the company’s accounts
receivable than their credit history. The
great thing about this type of financing is that the financer would assume the
risk of the account receivable. The
obvious con of factoring would be the discount that is being given to the
financer, and the fees that would entail.
Merchant
Cash Advance
Cash advances are proving to be a viable option for many
businesses. These are also great for
companies who are in need for cash in a timely manner. The cash is given in a lump sum, and the
borrower will promise the lender a share of their future credit card sales. This is also a great option for companies
that do not have the best credit history.
The appealing thing about cash advances is that they do not have the
interest rates or fixed payments that most financing options have. With that being said, the percentage of the
credit card receivables that is taken is usually hefty.
Being turned away from a traditional funding source does not mean
game over. These are just a few of the
non-traditional financing options that are available for small businesses.
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