We recently spoke about the best way to finance a budding startup. However, funding options are necessary at every stage of a business’ life cycle.
For strong, established businesses with a track record of profitability this step is relatively straightforward. In fact, most banks would be clawing to give you a loan. You’re a low credit and default risk.
For others, your business might have faced setbacks in the past. Missed or late payments, even defaults can set off alarms in your lender’s mind. That’s why many companies with poorer financial backgrounds might consider private lenders.
These days, there are numerous options when it comes to private lenders. Not all of them may have your best interests at heart. With all the noise and conniving lenders out there, it’s so much more important for companies that need private loans to do their homework.
This article will serve as a basic introduction to the different types of private loans you can go for.
Business line of credit
These are loans for companies with better credit.
Here, the loan amount will vary from the minimal of $2000 to maximum of $3,000,000. The loan terms usually range from 6 months to 10 years.
The interest rate is going to be Prime with 1% (but can go all the way up to to 32%.) You can get your funds on hand quickly, sometimes as soon as within 2 business days. This kind of loan is perfect for business, which have been operating for 1 year. It must have a minimum of $60,000 in the current annual revenue and require an ongoing source of the current working capital.
Revolving line of credit
Business lines of credits can well be obtained from private lenders or traditional banks, and the function is more or less similar to that of the credit card.
These lines are revolving. It means that you are asked to make minimum payment on monthly basis. But, you have every right to continue drawing against line, as long as the available credit is working within your favor. This loan comprises of variable interest rates with fluctuations in prime rate. It can easily affect the payment amount well.
Accounts receivable financing
Another kind of loan for you has to be accounts receivable financing. Here, the loan amount is up to 90% of the current invoices. The loan term will be from 30 days to 90 days and the factor fee will be 2 to 3% of processing fee along with a particular percentage of the outstanding invoices.
The time to get funding can vary a lot and is likely to be from 24 hours to 2 weeks. This type of loan is best suited for growing businesses, which have positive cash flow and with flexile short term financing needs. For some other values and detailed information, you can click here and get in direct talk with experts for more help.
Get to know more about it
Accounts receivable financing is also known as invoice factoring or financing.
The lenders, offering such finances, will basically work provide you with cash after understand taking outstanding invoices of the business as collateral. It is possible for you to borrow as much as 90% of the current value of open invoices. For the basic details, you can hop online and catch up with the various options available.
Although your business may have had financial trouble in the past, that does not preclude you from borrowing money and funding your business. As we have seen, you company may have untapped assets that can be used as collateral to unlock funding. And as we all know, that funding will keep your business alive to fight another day.