Conventional bank loans, personal savings, and venture capital are not the only sources of capital for businesses. Here are four other sources of credit for businesses:
– Small Business Association
7(a) loans. The federal government sponsors this program. It guarantees a portion of the credit lenders advance to small businesses. That means banks are guaranteed the federal government will reimburse them for losses incurred up to the guaranteed amount.
– Financing against business assets.
Business owners can get financing from lenders against certain business assets such as inventory, receivables, and purchase orders. The business owner will enter into an agreement with a lender to secure financing against the business’ inventory or accounts receivables (customer credit accounts). The business owner can also get financing from a lender to fulfill a purchase order from a committed buyer.
– Merchant cash advance.
A business owner can get financing against future credit card sales. The lender receives a portion of every credit card sale until it recovers its principal plus a premium. There is no pre-determined date for repaying the loan, no collateral, and no penalty for down sales months.
– Marketplace lending.
Companies such as Lending Club offer simpler, faster ways to get financing. They connect borrowers with investors, allowing many people to advance a loan to a business owner. The loan application process is easier, no collateral is needed, and longer loan terms mean lower monthly payments.