пятница, 10 февраля 2017 г.

Three Ways To Quickly Raise Business Capital WITHOUT An Investor Or Business Loan

When most businesses think of raising capital, they think of either taking on an investor or taking out a business loan. While both are viable options, they both take a significant amount of time, a large amount of administrative paperwork, and come with considerable risk.

Finding an investor can be nearly impossible for some businesses outside of possible friends and family. It typically requires detailed financial statements and projections, a sound business plan, lots of meetings and presentations, and usually a significant up-front legal expense. And, in order to secure the funding, the business owner is forced to give up equity in his/her company, many times losing a controlling interest.

Securing a traditional term loan from a bank can take weeks and usually requires financial statements, good credit, collateral, a personal guarantee, and many times the bank will require a "blanket lien" on the business. For those that meet these requirements, a term loan will usually provide the lowest interest rates, but the entire reason for the lower rates is that, by asking for things like collateral, it forces the borrower to share in the risk with the lender. If you default on your bank's term loan, they can come and take your collateral. This minimizes the risk for the bank.

However, many small businesses are not be able to attract investors and don't want to give up their hard-earned equity even if they can; and many do not have the credit score, financial history, and collateral to secure a bank loan; and would not want to take the risks if they could.

The good news is that there are alternatives that will allow a business to quickly raise capital without having to deal with the risks and hassles of taking on either an investor or a bank loan.

Revenue Based Loan

The first alternative is a Revenue Based Loan which is not really a loan but a transaction in which a business sells a percentage of its future sales at a discount in exchange for up-front capital. A merchant cash advance is a specific type of Revenue Based Loan where the business sells a percentage of its future credit card sales.

Revenue Based Loans are based almost entirely on business history and not the credit score of the owner; and they require no collateral or personal guarantee from the owner making them both much easier to qualify and much lower risk than a bank loan. There are higher rates associated with a revenue based loan than a term loan, but this is because, since no collateral or personal guarantee is required, the lender is taking much more risk. Revenue based loans also require minimum paperwork, usually just a short application and a few months of bank and credit card processing statements, and borrowers are typically funded in less than a week.

Another nice benefit of the revenue based loan is the variable aspects of the loan payments. With a traditional bank loan, the monthly payment amount is fixed throughout the term of the loan. However, because a revenue based loan is based on a percentage of the monthly sales, the payment amount is lower in months where sales are lower and higher in months where sales are higher. This can be very appealing, especially for seasonal businesses and businesses where it's difficult to forecast revenue.

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