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Funding Options for Small Business Owners

May 20, 2008
Small business owners know that obtaining credit lines for their businesses can be a difficult task to accomplish, especially if they own a fresh business or simply a business that doesn't have a strong credit history. I've come up with this list so you as a business owner can have an idea of who to reach for your financial needs.

Secured loans: For business owners with strong credit history.

Startup Loans - Small business startup loans are used by merchants that need funds to develop an idea, buy a franchise, or simply open a brand new business to the marketplace. Most startup loans are offered by lenders that require personal assets to secure their money.

SBA Loans (from Wikipedia) - SBA programs are not generally for merchants with a bad credit history who can't get bank loans, nor are they primarily used for startup funding; rather, the primary use of the programs are to make loans for longer repayment periods and with looser affordability requirements than normal commercial business loans. Also, a business can qualify for the loan even if the yearly payment would be the same as the previous year's profit, whereas most banks would want payment for a loan to be no more than two-thirds (2/3) of the prior year's profits for a business. The lower payments, longer terms and looser affordability calculations allow some businesses to borrow more money than they could otherwise.

Secured lines of credit - A merchant's line of credit is a revolving type of credit that can be used to access a limited amount of working capital. Merchant credit cards for example, are a type of line of credit.

Unsecured business loans: These types of loans or cash advances are for merchant who may not have a great credit history or simply for merchants who doesn't want to risk personal assets.

A business cash advance - Merchants that accept credit cards as a form of payment can sell a small portion of their future credit card sales for a given sum of cash. These types of advances are more expensive but have some advantages that attract most small business owners. Both, the lender and the business owner agree on a daily payback percentage that will be deducted from future credit card transactions until the advance has been fully paid.

Invoice Factoring - Is the process of business owners that sell their unpaid account receivables at a discount for. Invoice factoring differs greatly from bank loans, the value of the invoices are taken into consideration and not the business credit history, invoice factoring is not a loan product, instead it's a purchase of an asset and last but not least this process involves 3 parties instead of 2 that the bank does. These parties are: the Seller, the debtor and the Factor.

Unsecured business Loans - These types of loans require no personal collateral. Unsecured lenders will only fund business owners who have a good to perfect credit history, this is what defines whether the business owner qualifies or not for the loan.
About the Author
David Castro often writes articles about Business Loans and credit card advances for Merchant Resources International - To Learn more Visit Us at http://www.cashprior.com.
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