The Cheapest Option for Cash Flow Lending

Author: Justin Reynolds | March 6, 2017

Looking into cash flow lending options? If your small business is struggling with cash flow problems, take comfort in the fact that you’re not alone. According to a recent study, half of small business owners routinely struggle with cash shortages—and for a variety of reasons.

When cash is tight, small business owners often look for outside sources of financing so they can make payroll, stay current with their bills, develop new products, launch marketing initiatives, and otherwise grow their companies. Instead of going through the arduous process of trying to obtain a loan through a traditional financial institution or the Small Business Administration—both of which are extremely picky when it comes to approvals—many of them examine their cash flow lending options to determine which one makes the most sense for their specific situation. Generally speaking, they generally choose one of four options.

4 Options for Cash Flow Lending

  1. Merchant cash advances

    If yours is a business that collects credit card payments, you can opt to use a merchant cash advance. In this form of lending, you sell a portion of your future credit card receipts in exchange for fast money. While approvals are easy, if you choose this route, you’ll have to forego a significant amount of your income as merchant cash advances often come with significant fees.

  2. Invoice factoring

    Have a pile of unpaid invoices? That’s not as uncommon as you might think; according to our research, 64% of small businesses regularly deal with late payments. Since you can’t exactly spend your accounts receivables, some companies choose to sell outstanding invoices to third-party factoring organizations. Like merchant cash advances, factoring forces you to leave a lot of money on the table. Beyond that, factoring companies collect payments directly from your customers—which probably isn’t the best look for your business.

  3. Nonbank loans

    In the aftermath of the recent financial crisis, fewer banks are lending to small businesses. As a result, more and more nonbank lenders are entering the mix. These alternative lenders are willing to fund small businesses—regardless of their credit scores—if they have solid revenue streams and have been open for some time. Because of their more lenient approach to approvals, however, nonbank lenders often have significant fees attached to their loans.

  4. Invoice financing

    If you need money quickly and you don’t want to give up a significant chunk of your receivables, you can choose to use an invoice financing service like Fundbox that advances payments on outstanding invoices. You then have 12 or 24 weeks to repay the invoice, plus a small fee (read about our transparent pricing here). It’s easy to open a Fundbox account. Once you’re all set up and approved, you can start clearing invoices right away. Funds will then be in your bank account in as soon as one business day.

There’s no sense in foregoing a huge chunk of your receipts, potentially damaging your company’s reputation, or agreeing to stomach significant interest rates and other fees when you don’t have to. Allow Fundbox to take care of your small business’ cash flow lending needs, and you’ll be able to overcome any cash shortages you may face—without breaking the bank. That way, you’ll never have to worry about where you’ll find funding. You can focus more energy on growing your business instead.

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