4 Easy Business Loans to Consider
“Easy” might not be a word typically used to describe the process of obtaining a traditional business loan. Typically, it takes months of preparation and application for a business to connect with the right lender. Many people wonder whether getting a business loan vs a personal loan is easier to fund their company. But, easy business loans are out there. Many non-traditional options exist for businesses that need to quickly connect with cash or that don’t meet the qualifications of traditional lenders.
Merchant Cash Advance
A merchant cash advance (MCA) gives your business a lump sum of cash in exchange for a percentage of its future credit card sales. In essence, you’re selling your future sales to an MCA company at a discount. The MCA usually draws its percentage from your credit card sales daily until the loan is paid back. An MCA can work well for companies with seasonal ebbs and flows, as the repayment amount varies proportionally with your sales. An MCA can be funded within a day or two after the lender verifies a few things from checking documents like tax returns and previous monthly credit card sales. Good credit and a lengthy history in business are not requirements for an MCA, which makes it attractive as a startup business loan. Comparatively, the interest rates on an MCA can be quite high, but this type of loan can help a business in a pinch.
Invoice factoring companies “buy” your outstanding invoices at a markdown. Your business will receive a single payment and the factoring company will collect on your invoices to repay the loan. Of course, this type of financing demands that your business has invoices to collect upon. It can be helpful when you need cash immediately and don’t have time to wait out the repayment terms on the invoice. If, for example, your business experiences a gap in cash flow and needs to cover payroll, invoice factoring can be a good option. Compared to an MCA, invoice factoring is less risky, since it involves money you’ve already made as opposed to projected sales. However, like an MCA, invoice factoring involves significant fees.
Peer-to-peer lending is a practice that matches borrowers and lenders online. The borrowers can be individuals or businesses, as can the lenders. Many people and companies participate in peer-to-peer lending as a way to invest that yields higher returns than buying investment products from conventional banks. Because everything is handled online, peer-to-peer lending platforms can offer borrowers lower interest rates than many alternatives. Depending on their credit score and business history, companies hoping to borrow are rated so potential lenders can assess their risk. The riskier the investment, the more difficult it will be for the borrowers to get favorable rates and terms. Peer-to-peer lending moves at the speed of the Internet, so it is a quick and easy small business loan option.
Online lenders provide a marketplace where borrowers and investors can conveniently shop and connect. After entering some simple application information, online lenders present a business with several lending options. Interest rates and terms will vary based on the lender and your business credit score. Generally, online lenders offer less favorable rates and terms than traditional lenders. However, for many businesses that don’t quality for a conventional bank loan or that need cash urgently, online lending can be a lifesaver. Once you find the right match, online loans can be funded within a few days.