5 Alternatives to a Business Line of Credit


If you need funding for your business, but you’re not looking to open up a business line of credit, you may be wondering what your other options are. In this article, we’ll take a look at 5 of the best alternatives to a business line of credit, so that you can pick the option that may be right for your small business.


  1. Business Credit Cards


If you already have a business credit card, you may be able to take out a cash advance on the card. However, when you take out a cash advance on a business credit card, you’ll usually face a fee of up to 5% of the cash advance – as well as immediate, high interest charges. So before doing this, be aware of exactly what you’ll be paying to the card issuer. The fees may just be too steep.


  1. Merchant Cash Advances


A merchant cash advance (MCA) is, essentially, a loan issued to you based on your future sales. An MCA lender will give you a lump sum of money – say, $20,000 – and in return, you will give them a percentage of all of your credit card sales, every day, until the loan, fees and interest are paid off. An MCA is a good choice if you primarily sell to consumers, and have a strong cash flow, but need a loan to cover some unexpected costs.


  1. Term Loans


Term loans are traditional small business loans, usually issued by banks and other lenders. You’ll need a good credit score and a strong history of running a successful business to get a good term loan, in most cases, so it’s not an ideal choice for folks who may have had credit struggles in the past.


  1. Equipment Loans


If you’re purchasing a large piece of machinery or equipment, or even equipment like computers or an upgraded POS system, you may be able to get an equipment loan. These loans offer fixed APRs which are usually quite reasonable and can be set at a 1-6-year term, or even longer by some lenders, resulting in very manageable monthly payments.


  1. Invoice Factoring


Invoice factoring is a good option for companies who sell primarily to other businesses and government agencies. How it works is simple. An invoice factoring company buys all of your outstanding (unpaid) invoices, and you get about 80% of their value immediately. Then, your clients pay the invoice factoring company directly. After the invoice is paid, the invoice factoring company sends you the remaining 20% of the invoice – minus their fees, and any interest or other charges.

If you have strong cash flow and a large number of outstanding invoices – but can’t wait for each company to pay – this may be a good choice for you. You can get your money now, for a relatively reasonable fee.


Compare Your Options – And Get The Cash You Need For Your Business!


Each of these business line of credit alternatives may be the ideal choice for you, depending on your circumstances. So, do a bit of thinking about your business, your finances, and your organizational goals – and you’re sure to make the right choice, whether you choose a merchant cash advance, invoice factoring, or any of the other options on our list.

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