Unsecured Business Loans
There are many ways to take advantage of unsecured business loans to continue scaling your business. Managing cash flow and maintaining access to capital is always a strategic concern for entrepreneurs. Finding the balance between investing in your company, servicing clients, managing inventory and keeping a float available for unexpected expenses can be tricky at times. With that said, there may be some ways to gain leverage that you haven’t thought of yet. It’s easy to get distracted with putting out fires and managing staff, however, making sure you have liquidity is just as important to the health of your business. Below, we discuss some of the choices you have when looking for a non-collateralized business loan.
Term Loans
When looking for an injection of capital for your business, a term loan is one of the more typical choices. This lump sum loan is usually a short term method of financing with manageable interest rates and a pre-determined payment schedule. When applying, you will want to consider what you will be using the loan for and how you are going to pay it back. In some cases the length of terms can be as short as 6 months with a daily payment schedule, or as long as a few years with monthly payments. This type of loan is good for a large business expense or investment where you will be able to generate a return on investment. It’s always a good idea to make sure the cost of borrowing makes sense for the projected returns. Leveraging other people’s money has been a tried, tested and true business strategy for many years, especially when planned and executed with discipline.
Business Line of Credit
Depending on your needs, you may be looking for a more flexible method of borrowing money for your business. A Line of credit gives you access to funds, but unlike a term loan the debt is revolving. This could be used for emergency funding when unexpected expenses arise in your day-to-day operations. Rather than having a fixed recurring payment, you would be able to make minimum payments against the balance owing on this credit line. Depending on the size of the loan, it may be easier to manage the payments over time, with the added benefit of having immediate access to those funds again, as you pay down the loan.
Invoice Financing
Although it is not considered an unsecured business loan, invoice financing can also be a great way for businesses to access working capital. If your company receives payments from your clients on an ageing accounts basis, there could be gaps between your need for liquid cash and the time it takes before processing payments you receive for services or products sold. In this case a lender would look at your accounts receivables as an asset you can leverage for a loan. With invoice financing, lenders would provide a loan up to 95% of the balance a customer still owes to you, which you would pay back as the invoice gets paid. This way you benefit from having immediate access to cash to manage business expenses and pay employee salaries, instead of waiting 30, 60, 90 and sometimes 120 days to collect from your customers. The lender makes their money when you transfer 100% of the invoice value, keeping the remaining percentage over the loan amount as their fee for advancing cash. In some cases a lender may also require interest to further manage their own risk. Regardless, this type of loan could be a great benefit to a company that sells high ticket items, or provides continued services with accruing charges over time. Keeping the cash in your hands could be critical to your business success, and invoicing financing does just that.
Merchant Cash Advances
For a retail establishment or business that consistently completes sales via debit card transactions, the option for merchant cash advances could be the key to accessing capital. The lender supplies a lump sum of cash to your business in exchange for a a cut of the revenue generated through your future sales transactions. You may incur additional fees, however this method can be a flexible choice to help manage cash flow. Rather than paying a fixed monthly amount on a term loan, payments may be more frequent, yet based on actual sales volume. This could help your business as you end up paying less money for the loan when sales are slow or infrequent, but you may also pay more when sales volume is high. Just like any other form of financing it is always important to understand how it will affect your margins. If a merchant cash advance is right for your business you’ll have quick access to cash for various expenses.