Know your options
Small business lending options can be grouped into three general baskets:
- Business Loan – A general small business loan can come from many different sources, such as a personal loan from a family or friend to a government-backed loan from the SBA.
- Business Line of Credit – A business line of credit is typically a short-term financial instrument.
- Merchant Cash Advance (MCA) – Merchant cash advances typically come at a high cost, but it’s also the most accessible lending option available. With merchant cash advances and invoice factoring, businesses sell a portion of future sales or payments to a lender in exchange for a chunk of working capital.
The best way to compare your financing options is to ask yourself the following questions:
- How much will I get?
- How long do I have to pay it back?
- Are prepayment penalties involved?
- What is the cost of borrowing the money?
- What fees are involved?
- How long does it take to access the funds after the application is submitted?