Fast Working Capital: Top 6 Choices in 2020

22
October 2019

You just spotted an amazing opportunity. Perhaps you need a little financial boost to fund materials or equipment for a big order or project. Or maybe you need more inventory and/or staff to take advantage of the holiday shopping season.

Whatever your reason, the business world moves to fast for you put everything on hold for the month or so it typically takes to be approved for a traditional loan. You need funding now – here’s where to find it:

1: Online:

Small business owners are increasingly looking online for expedited access to fast funding. Pick the right funder and you can expect a simplified loan application process, with more flexible credit history requirements than those imposed by big banks. How can you find the right funder? Check reviews look at the company’s Better Business Bureau score, and make sure they have a real address in the country where you reside. Or get expert help. The easiest way to find an alternative lender is to get pre-approved by One Park Financial, which then gives you access to a network of more than 30 funders and a funding experts who will help you quickly sort through your options. Online lenders are virtually always going to be your fastest funding source, once you accept an offer you can receive funds within two business days or less.

2: Peer-to-peer:

If you have a solid credit history (600+) you can investigate peer-to-peer lending. These platforms connect small business owners with funders such as individual investors, hedge fund managers or investment banks. And while most of these platforms do deliver funding faster than traditional banks, you should check the FAQs and terms. The speed of an individual offer will depend on where it originates – if it’s a large investment bank, its unlikely you’ll see fast cash availability.

3: Microlenders:

These offer loans up to $50,000. They may be able to get you working capital fairly quickly, but this depends on who is offering the loan. Many microloans are offered by community-based organizations, or bigger non-profits. Some are funded by individual investors, or by companies (ranging in size from small to big corporations). These loans may come with an offer of free consulting to small business owners, often from retired business executives or financial consultants. Not the best option for business owners who need super-fast access to funds, but typically a very affordable option.

4: Personal loan:

Obviously, this is the fastest way to access funding and its unlikely a family member or friend will insist on reviewing your credit history before extending you a loan. But we’ve all heard the horror stories of family relationships or friendships gone bad due to unpaid loans. Choosing another financing option is often preferable.

Faster Funding Options

Many of us think of funding as a limited option: you apply for a loan. If you’re accepted, you sign over a bunch of collateral, and pay the loan back over a few years. If you’re rejected, you simply don’t get funded. But there are a world of new possibilities that small business owners can leverage to access working capital.

5: Invoice Financing/Factoring:

It's not uncommon for small businesses to wait 30-90 days for invoices to be paid. When business is slow, those unpaid invoices can cause significant cash flow problems. An invoice financing loan provides expedited access to funds. There are two options for invoice financing: a factoring loan and a discount loan. With factoring, the lender funds the borrower with a portion of the amount due on invoices. The lender then collects the full invoice amount, plus fees and interest. With invoice discounting, the funder loans the business owner a percentage of the invoice, but the business owner is responsible for collecting the payment and paying back the loan along with fees and interest.

6: Merchant Cash Advances (MCA):

These are, as their name indicates, an advance on money that you will earn in the future. You pay back the advance via a set percentage of the daily or weekly revenues. For small businesses that see daily transactions, such as restaurants or shops, this can provide an easy way to access funds quickly. Lenders look at a business’ receipts to determine whether to approve the advance, so small business owners with low credit ratings are often able to get approved for a Merchant Cash Advance.

According to a recent Small Business Credit Survey (SBCS) by Federal Reserve Banks, 79% of those who applied for a merchant cash advance were approved, as opposed to 62% of the applicants for a business loan. Additionally, the SBCS report found that the chances of being approved for an MCA by an online lender were significantly higher than gaining a loan approval from a bank or credit union. And while money from a bank loan may not be available for a month or more, according to a study by Harvard Business School, MCA funds are typically deposited into the business owners account within 72 hours.

Be aware that it can be hard to understand an MCA contact, even for those who are familiar with standard financing terminology. Understanding how the loan is paid back, what the percentage of sales amounts to in real money, factor rates and the total amount that is actually owed (receipts purchased amount) is critical. For help in crunching the numbers and understanding your options, you can turn to One Park Financial. The company’s small business experts will help guide you through the funding process. Visit oneparkfinancial.com or call 855.218.8819 for more information.