Bank Loan Alternatives

If a bank loan is a problem, here are some alternatives

In a difficult credit environment, you’re sure to find it difficult to get a bank loan. In such a situation, you need alternatives to a bank loan. Here are a few:

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  Peer-to-peer lending: You could approach online sites such as LendingClub.com and Prosper.com who give out loans to small business owners in need of money. It works like this: a business posts its profile on the lender’s site, giving its company background information and its need for money. Lenders scout such profiles for investment chooses from amongst its database and offers a loan to promising business owners.
• Micro-lending: Usually, non-profit organizations offer small business loans a maximum loan of $150,000. Micro-lenders look for industry experience, collateral and a good credit score from their applicants.
• Receivables financing: Also known as factoring, a factor usually finances businesses up to a maximum of 70%-90% of the value of its receivables and then takes on the responsibility of receiving the loan amount.
• Purchase order: Also known as merchant cash advance financing, here companies offer a cash advance before a sale can be executed, usually in the case of a purchase order for goods and services that is signed. Alternatively, they could also provide cash down in lieu of a merchant’s future credit card bills.
• Credit and charge cards: These cards are often the first source of financing small businesses. This is perhaps the easiest way of funding a small business, just so long as one can pay back the balance every month.
• Supplier credit: Here, a supplier offers a small business, with which it deals, a short term credit facility. This is in the form of a repayment agreement that could go up to a maximum of 90 days. Based on the business’ cash flow situation, the terms of the agreement could allow the former to receive supplies, sell them, collect payment for goods and repay the supplier.
• Credit unions: They work on the principle of a financial cooperative that comes into existence for the welfare of its members. It is owned by all its members and run by some of them. They work in the same area, are members of any other organization and have something in common with the other members.

They invest their money in the fund of the union, which is then offered to other members of the union as loan advances for a high rate or interest on individual members’ savings than a bank could offer. Each contributing member receives this interest amount as a dividend, not as monthly interest. However, to benefit from a credit union, the first requirement is that you become a member of it. As a borrower, you will receive a high standard of protection from the union.

• Business cash advance: This refers to buying the future credit card sales of a business. With the use of credit card factoring, providers of such loans offer small businesses with cash lump sums to be repaid through a small percentage of the sales from their daily credit card.

A business cash advance is a much easier way of getting the desired business loan than a traditional bank loan since qualifying for it is much easier. It is also a faster method of financing businesses and as a system of financing, it is totally unsecured. Here, borrowers an avail of funds in barely seven days after being approved.

By Mithi Chinoy

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