Which Small Business Loan Programs Make Sense for you Business?
Lets face it, it’s a confusing mess out there if you are a business owner trying to obtain working capital and surfing the net to understand your options. The confusing thicket of claims, counter claims and outright deceptions can make even the most patient of people thoroughly frustrated. However, the thing to remember is, there are only so many ways to get a loan for business, and the brief guide below will attempt to make sense of it all.
Business Working Capital- Financing for Small Business
- Cash Advance/Merchant Advance Programs – These are not true loans, but actually are advances against anticipated future credit card sales. Typically they carry high rates and are short term and are unsecured except for a UCC filing against the business. Payments are collected in a small amount daily, rather than monthly, and are usually swiped automatically out of the credit card processing batch. Rates are anywhere from 21 cents on the dollar to 50 cents on the dollar, depending on the file and credit of the business. Business must accept credit cards to qualify for this type of advance and may be required to switch credit card processors. Never pay an upfront fee to apply for this type of advance.
- Bank Only loans- These are similar to the cash advance loans listed above, except they are designed for businesses that only accept cash or cash equivalents and do not accept credit cards. The main factor here is the health of the most recent 6 months of business bank statements. Health means, few to little NSF’s or negative balances within the review period. This is an unsecured loan or advance with short terms(6,9 or 12 mos) and small daily payments that are ACH’d out of the business bank account. Rates are usually between 21 cents and 30 cents on the dollar.
- Equipment Leasing- While not a true loan, this a monthly payment option that allows businesses to get the various equipment or “hard” assets such as furniture or computers that they may need to conduct daily business. A lease will only work for assets a business will keep to use in the transaction of their daily business, not for items such as inventory. The upside is that when the lease period is over, usually a term of 3-6 years, the business may elect to keep the equipment/assets, or decide to upgrade and get new equipment and the leasing company will remove the old assets. No need to hassle with a resale market. Look for the very best rates, which few people will qualify for, at around 9 percent ascending to as high as 19 percent or more depending on credit and other variables.
- Loans against existing equipment- Intended for certain industries that are very “asset” heavy, such as established construction companies or manufacturing concerns. Essentially, the lender will secure a loan against the existing equipment of the business, minus any money due outstanding loans. Keep in mind also that any lender of this type of loan will not give the full value of the equipment as a loan. Typically, they will only lend against a percentage of the anticipated resale value at auction prices.
Need More Info? – Check Out Business Working Capital Loans or email info@silverstreakfunding.com