Alternative Business Finance

Alternative Business Finance


When the banks say "NO" all is not lost. There are many other "Alternative" business financing methods available to small business owners that are not bank based. If you have less than perfect personal credit or you have yet to develop strong business credit scores, then these sources of alternative business financing may be your best bet.


Credit Union Term Loans
Credit Unions tend to be much more liberal in their lending practices to their members. Where a bank might require the business owners to have 720 or higher personal credit scores, credit unions are normally north of the 640 mark. The 80 point score difference can mean an approval versus a decline. Many credit unions only make personal term loans and not business term loans. This can work to your advantage because a loan can be made to each business owner which may increase the amount available to you.

Lines of Credit
These come in many forms, but the ones we will explore here are from vendors, retailers, and wholesalers. There are over 3,000 of these available for almost every product and service imaginable. These are business to business credit lines, many of which are credit cards good at all their locations, such as gas fleet cards, home building cards, cards for hardware, electronics, computers, office supplies, building materials and much more. Then there are credit lines for Net 30 or Net 60 payment terms where you can acquire a full spectrum of products or services on buy now pay later terms.

Factoring or Purchase Order Financing
These two types of financing allow you to take a fulfilled order or a requested order and get cash for it now. With factoring you have an unpaid invoice that you sell to a "Factor" who typically buys it from you at 97% of its face value. You get the cash now and the factor collects on the invoice. The upside here is that you do not have to have a billing or collecting department as the factor fills that roll for your business and you get your cash as soon each invoice is fulfilled. With purchase order financing, which most factors do, you have a purchase order for goods that maybe you need to purchase wholesale to be able to deliver. You sell the purchase order for a discount and the money is provided to fulfill the order.

Revenue Based Loans
These come in two forms. One is a merchant cash advance where you are selling future credit card receipts at a discount. Here the buyer (aka lender) buys an amount equal to maybe 1.5 times your average month credit card receipts and advances you the cash. For example if your average monthly credit card receipts for the last six months have been $20,000 then you could receive an advance of $30,000. The other type is similar but instead of credit card receipts it looks at your last six months of monthly bank statements and typically advances the same 1.5 times your average monthly deposits. Both normally take a daily payment from you either by a percentage of your daily credit card receipts or a daily withdrawal from your business bank account.

Credit Cards
Credit cards from both banks and credit unions are usually easier to obtain than are bank business loans. The beauty here is that you can blend both personal and business credit cards to maximize the amount of funding you receive. Like business term loans the owner's personal credit is all that is considered and the credit cards can be obtained per owner of the business to maximize the amounts available. Typically for personal cards the owner's credit scores need to be in the 680 plus range and for business cards they will need to be 720 or higher.

Inside the Level4Finance business success system you will have access to step-by-step comprehensive business credit building instruction to obtain everything you need to build and maintain strong business credit scores and to pre-qualify for a spectrum of business loan programs.