When you need money for your business it's important to carefully weigh your options. Taking out a loan to launch an unproven business probably isn't the best idea, for example. But for established companies that need capital to invest in equipment or inventory or to expand operations, a loan can be a life-saver.
Here are a few lending alternatives that may not be on your radar.
Borro is a luxury asset lender, meaning if you own valuable assets such as fine art, diamonds or a luxury car, you can put it up as collateral and receive between 50 percent and 70 percent of its value, depending on the item. While you initially apply online, Borro employs experts formerly with big auction houses such as Sotheby's and Christie's who appraise and collect items offline. They do it quickly, too--Borro says the process can be completed in less than 24 hours. Once Borro has possession of your item the company wires the funds to your bank. You have several months during which you can return the money, plus interest, which runs around 4 percent. If you don't reclaim your item Borro will sell it, usually after 10 months. Since launching in 2008, Borro has funded more than $180 million in transactions.
Pro: Since the loan is secured against an asset, no credit check is required and the credit agencies are not informed about the transaction.
Con: It's not a long-term financial solution.
Merchant Solutions Group
Merchant Solutions Group (MSG) is one of a large number of companies like it that offer a lump sum payment in exchange for a cut of your future income. Specifically targeted at companies with strong credit card sales, MSG takes a cut of your daily Visa and MasterCard sales--anywhere from 3 percent to 40 percent--until the advance is paid in full. Since 2007, MSG has provided more than 1,500 U.S. businesses with $200 million in working capital.
Pros: You can get funds within 48 hours and no personal guarantees or collateral are required. Also, there's no set time frame for payback.
Con: Your company must be solvent enough to withstand a slash in receivables.
SmartBiz is an online platform where you can apply for a Small Business Administration (SBA) loan which can be dispersed in as little as a week. Unlike other online financing offers which often only provide shorter term loans to businesses, SmartBiz offers a 10-year loan term, an interest rate of 6 percent and loans from $5,000 to $350,000, with about a third of its loans dispersed to women-owned businesses. The company processed about $450 million in loans in 2014.
Pro: A longer term loan involves a smaller monthly payment. Collateral is not required for loans $25,000 or less.
Cons: You'll need a credit score of at least 620. A personal guarantee is required. Loans between $151,000 and $350,000 must be fully collateralized.