After having made a profit, businesses can put back some or all of that profit into their business to support growth. However, businesses may at times need additional financing from a credible lender and for most cases, they turn to banks for the necessary financing. If you are looking for alternatives to bank loan, we have put together a series of options for you to consider according to your business needs.
Alternatives to Bank Loan
Bank loans are highly common for small businesses that are looking for financing. However, some may find that the stricter lending policies make it difficult for them to secure loans which are crucial for their business operations. Thankfully, there are other alternatives to the traditional bank loan which businesses can turn to.
Business Line of Credit
A line of credit is an amount of money that is set which is for use by a business for financing purposes. The line of credit can either be secured or unsecured. Some form of collateral is required for a secured line whereas an unsecured loan does not. Once the line of credit amount has been paid off, the amount can be used again in the future.
Merchant Cash Advances
A business can receive a lump sum of money for financing through a merchant cash advance. This is made possible in exchange for a percentage of their credit card sales in the future. For those who receive regular credit card payments, this alternative is an ideal option.
Working Capital Loan
This loan helps a company to fund its core operations. This is useful when day-to-day operations are causing financial hardship due to factors like seasonal businesses or companies that are subject to cyclical sales. However, it is also not impossible for businesses from various industries to experience working capital shortfalls from time to time. A working capital loan is not a specific type of loan but more of a category of loans. Any type of loan that provide financing support for short-term business operations could be considered a working capital loan.
Equipment is an essential component of most businesses, hence if that equipment fails, the business operations can be adversely affected. In such times, many small businesses lack the capital to perform equipment maintenance. As business owners can make use of their equipment as collateral, they can get financing for a large portion of equipment cost.
Professional Practice Loan
This is a specialty loan that is designed to provide financing for accounting, legal, and medical professionals. Most of these loans cater to medical practitioners as they often have greater financial needs due to the hefty cost of medical equipment. The loans could be used to buy initial equipment or acquire other professional practices. Debt consolidation and operational expansions with real estate are also other possible uses for this type of loan. These loans may also include malpractice insurance costs.