Most smart small business owners are aware that there is a variety of small business funding options to choose from. But it is up to you to determine which funding method is the smartest choice for your individual small business.
A bank loan is a business loan that can be attained through a bank. This is the most traditional form of business financing. Business owners can apply for a bank loan by visiting the bank, preparing a business loan request and presentation, completing an application and providing documentation, such as personal financial statements.
Pros:
Business loans can be attained with low interest rates, and small business owners can get money for their business depending on the bank's faith in the small business owner's business plan.
Cons:
Bank loans are often secured loans, meaning, they require an applicant to provide collateral should he/she not be able to completely repay the loan.
Banks look at applicants' credit scores to determine their likelihood of repaying a loan. Therefore, small business owners with less than perfect credit have less of a chance of having their bank loan applications approved.
With a business line of credit, small business owners can have revolving credit, like personal credit cards for their businesses. They receive credit up to a certain amount and they must pay at least the minimum payment every month.
Pros:
The revolving credit allows small business owners to have constant access to cash for their business without having to repeatedly apply for a small business loan.
Cons:
Like a personal credit card, there is interest. Once you've reached your limit, you must pay at least the minimum payment every month, and if you are not paying your credit card in full every month, you will be in debt while you continue to make payments and have no money to spend for your business until you are able to pay more than the minimum payment.
Through equipment leasing, small business owners rent or lease equipment for a flat monthly rate, from a lender who owns the equipment.
Pros:
Once the lease is over, the borrower usually has an opportunity to purchase the equipment.
Cons:
Usually equipment is more expensive then bank financing
Merchant Cash Advance - The Smart Small Business Loan
A merchant cash advance is a cash advance in exchange for a business's future credit card receivables. Business owners receive cash upfront. Then, following funding, a small percentage of the businesses' daily credit card sales goes toward the repayment of the merchant cash advance.
Pros:
No collateral, no fixed monthly payments, no interest rates! Small business owners can get the cash they need and fast. The whole process, from application to funding, can occur in as little as 2 weeks.
The payments are taken as a small percentage from the business's credit card sales. So, if your business's sales are slow, you pay less. That's why it's called a smart small business loan.
Cons:
Only owners of retail and service-oriented businesses that process credit card sales can benefit from this smart small business loan, since the repayments are deducted from a business's daily credit card sales. As merchants, you have a special opportunity available to you with the Merchant Resources smart small business loan, and we encourage you to take advantage of that opportunity!
