Practical Alternatives to Merchant Cash Advances

Many businesses turn to merchant cash advances whenever they need to borrow money. While this does present you with a viable way to access funds, it is not your only option. Here are a few practical alternatives to merchant cash advances.

Business-to-Business Lending

An option that you have besides a merchant cash advance is business-to-business lending. With this method, you will actually talk to another business and propose a direct loan. The other business would set up a loan for you and get you the money that you need. You would then be responsible for repaying the loan to the other business over a certain period of time. You may need to make a monthly payment in order to pay off the loan, or flexible payment terms might be available. This option could be attractive because it will likely not depend on your credit history as a business. The only problem with this option is finding another business that is willing to lend you money.

Lines of Credit

Another option that you have is to use lines of credit. Many of the suppliers and companies that you do business with may be willing to offer you lines of credit. A lot of credit will provide you with flexible payment terms in order to pay your bills. For example, you might have 90 days to pay your invoices before any interest is charged on your account. This can be very beneficial when you have several different companies that you work with. You could potentially borrow quite a bit of money through your various lines of credit.

Bank Loans

Many business owners turn to merchant cash advances because they do not believe they would be able to be approved by a commercial lender. Although traditional lenders do tend to be stricter, that does not necessarily mean that you would not be approved for a loan for your business. Commercial lenders have to lend money in order to stay in business. This means that you should keep trying with various commercial lenders before giving up on the process. Each commercial lender is going to have unique criteria for approving loans. As a result, some lenders may approve you when others will not.

Equity Investment

You might also consider looking towards private investors to see if they would want to purchase part of the company's equity. Equity financing can be a great way to raise cash that never has to be paid back. Many companies can raise large amounts of money in a short amount of time with this strategy. You will essentially be selling part of the ownership in the company to a private investor or another corporation. Although you will be getting money that does not require repayment, you will be giving up part of the ownership in the company. This means that if you do not want to give up any control of your business, this would not be the best option for you.

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