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If a business accepts credit card payments, then a Merchant Cash Advance (MCA) is a very attractive form of alternative lending. Instead of conventional financing, where a loan is paid back in sizable monthly installments, businesses who use MCAs receive their loan, and then pay it back in the form of a flat percentage of credit card sales. For example, if a restaurant needs working capital, but cannot get financing through regular bank loans, then the restaurant can get a merchant cast advance, utilize the funding as they see fit, and then pay it off through a small portion of the total volume of credit card sales. The higher the volume of sales, the faster the MCA is paid off.

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Factoring is a form of alternative financing that will not only get a business the working capital it needs, but it is a great way to streamline accounting – even businesses who do not need money use factoring. Factoring is a method by which companies sell their overdue accounts receivables to a collection company in return for cash. For example, a manufacturing company has clients with outstanding bills, but diverting time and payroll hours to have someone hunt down that money would be a waste of resources. By selling those bills to a factoring company, the business receives money (minus a percentage fee from the factoring company), and they take the headache of tracking down the owed money off of the company’s hands. Factoring is a great alternative financing method that allows businesses to receive working capital from customer bills that might otherwise not yield a single penny in a timely manner. Many businesses sell all outstanding customer bills to factoring companies after 90 days or so, just to stave off any strain on the cash flow, and to take any additional strain off of the accounting department.

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For companies that manufacture goods, restaurants, IT companies, beauty salons – basically, any business that uses equipment – asset based lines of credit are a great alternative business funding method. Lenders will extend lines of credit based on the value of the equipment and hard assets owned by the business (and, by extension, the business owner). The higher the value of the assets and equipment, the greater the line of credit and access to working capital that can be extended to the business.

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Sometimes business owners do not have the collateral to leverage against a traditional loan. Perhaps the business is just getting off the ground, or the business has a lucrative operation but a small customer base, or perhaps the business has very low overhead and the owner doesn’t have a house or major equipment to use as collateral. In these cases, many business owners turn to unsecured lines of credit as an alternative financing method to get working capital. Unsecured lines of credit usually have a much higher interest rate and payment terms than conventional loans, because the lender is assuming all of the risk in the investment.

[/product_feature][product_feature title_color=”#be9f2a” title_font_size=”22″ description_color=”#555555″ description_font_size=”14″ icon=”fa-usd” icon_color=”#ffffff” icon_bg_color=”#1a398b” icon_size=”22″ title=”Crowdfunding and Micro-Investors”]

One of the more popular forms of alternative lending comes in the form of crowdfunding and micro-investments. Some business owners will post their business ideas or goals online, so people and investors can give money to help the business reach its goals. Typically, these businesses will offer something in return when certain goals are met, or when certain amounts of funding are received. These crowdfunding campaigns can be risky, because the business does not usually receive any money until the total goal is reached.

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