9 Types of Financing for Small Businesses in a Tight Spot

9 Small Business Financing Sources to Explore

With so many different business types, industries, growth needs and external factors that influence the business environment, there are many reasons why a company might find itself in a tight financial situation. The right small business financing option can help your business stabilize cash flow, restructure finances, add to your team, expand your location, weather a difficult period, and so much more.

One of the hardest parts of securing a small business loan is simply knowing where to start. With several forms of financing available, it can be challenging to determine which one is right for your unique situation and business type. If this sounds all too familiar, the following list will help. Here are 9 types of small business loan options you should consider in your search:

SBA Loans

Essentially, an SBA loan is a small business loan that is partially guaranteed by the government. This structure eliminates some of the risk for the financial institution – typically a bank or other traditional lender – who is issuing you the loan. The repayment period for this loan type tends to be more lenient than other options, since it depends on the intended purpose of the cash. For example, a loan for equipment may range from seven to ten years, while a real estate loan may allow up to 25 years.

Term Loans

A more commonly known option, a term loan provides a large sum of money upfront. This advance comes with a fixed amount, a fixed duration for repayment and a predetermined interest rate. Depending on the lender, you may be able to opt for a fixed or floating interest rate. Some online lenders have been known to offer up to $1 million. They are also known for having a faster lending process than a bank.

Invoice Factoring

Over the past few years, this financing option has become increasingly popular. It is not only fast, but provides a debt-free form of securing cash. Essentially, your business sells its unpaid invoices in exchange for quick working capital. Your business is given money it has already earned, so there is no burden of debt. The key is to work with a lender that understands your business type and industry – not all factors are created equal.

Merchant Cash Advance

Another popular option, merchant cash advances get your business money upfront – fast. In some cases, in as little as 24 hours. Unlike term loans, a cash advance allows your business to make payments either by withholding a percentage of your daily debit and credit card sales or fixed weekly/daily withdrawals from your business bank account. Keep in mind, this option does involve higher interest rates.

Business Credit Cards

Business credit cards have been a go-to source of funding for many small business owners for some time. These revolving lines of credit allow you to draw from and repay funds as needed. You simply have to remain below the credit limit. If you’re in need of funds from time to time to finance ongoing expenses like travel or office utilities, this might be a good option to manage your small business’ short-term or recurring needs.

Author Bio: Michael Hollis is a Detroit native who has helped hundreds of business owners with their business loans solutions. He’s experimented with various occupations: computer programming, dog-training, accounting… But his favorite is the one he’s now doing — providing business funding for hard-working business owners across the country.