Obtaining traditional bank loans is not always possible and it is wise to keep your options open. Fortunately, there are alternative lending options and some of them do not even require you to have good credit. Here are the five best lending alternatives to traditional bank loans.
Equipment Financing and Leasing
If you own a lot of equipment or machinery, they may be your key to obtaining some extra money. You can seek out a lender to buy your expensive equipment and lease it back to you. This lending alternative is called equipment sale-leaseback. The own drawback of this option is that you will no longer own the equipment.
Merchant Cash Advance
Merchant cash advances are also a great option. The main advantages of this include no due dates or fixed payments you are required to meet. This is a viable option if you do not have the best personal credit but still need quick cash to continue running. Lenders will review your monthly credit receivables and give you a short-term loan. Once you develop a pattern, it becomes easier to renew these loans.
A third alternative lending option to take advantage of is microloans. Despite the name, they can go for up to $150,000. These are often loaned to businesses who do not quite meet the standards banks require. A major advantage of choosing to get a microloan is far less documentation. It is important to be aware that interest rates for microloans can range from 12 to 18 percent, which is significantly higher than bank loans.
Using Your Receivables
Another option is auctioning receivables. The Receivables Exchange was started in 2018 and is a marketplace full of sellers and buyers. As a seller, you can set the price you want and as a buyer, you can purchase receivables and make a profit thanks to the paid invoices. Keep in mind bookkeeping, collections and other traditional factoring services are not available when you auction on an exchange.
Purchase Order Financing
Last but not least, purchase order financing comes in handy when you find yourself stuck and unable to fill a purchase order. To have enough money for manufacturing and fulfillment, an agent can advance you money. Financing is not based on the credit of your business, but rather the customer’s credit.
These five alternative lending options including equipment lease-backs, merchant cash advances, microloans, auctioning receivables and purchase order financing are great ways to gain capital in untraditional ways. If you own a lot of expensive equipment, taking advantage of equipment lease-backs is a wonderful way to obtain the finding you need to keep your business running.