How to Earn Aeroplan Points
Aeroplan is a well-known travel rewards program run by Air Canada. The Aeroplan program boasts millions of members and is considered Canada’s top trav...
Loans Canada: The Country's Best Loan Comparison Platform
Categories
Business Financing Business Loans Merchant Cash Advance P2p LendingToday’s economy coupled with the competitiveness of the credit market, being approved for a business loan can sometimes seem impossible. Banks and other traditional lenders aren’t so willing to approve just anyone anymore, the application process is rigorous and approval rates low. But if you find yourself continually being rejected for a business loan what you really need you’re not out of luck just yet. There are lots of other options for funding your business you just need to look in the right places.
We’ve put together a list of some of the best alternate ways to finance your business, including the pros and cons of each option. This way you’ll have all the information you need in one place to make the best choice possible for both you and your company.
Accounts receivable financing (factoring) is when a company receives an order for their product and instead of fulfilling it, sells the order (accounts receivable) to another company who will then fill the order. The company that purchases the accounts receivable is often referred to as the third party or factor. The factor usually purchases the order for 80% of its value upfront and then pays the original company the other 30% when the order is complete, the factor will also collect a fee of 2 to 6%.
Pros
Cons
If your business has most of its money tied up in its accounts receivables, if you run a wholesale or distribution company or are part of the import industry then factoring is a great option for you. There are lots of accounts receivable financing options for you to choose from so just like with any financial decision make sure you do your research.
A merchant cash advance provider gives a company a cash advance based on the size of their monthly credit card transactions. Every cash advance provider is different so the terms will vary from provider to provider. Typically a merchant cash advance provider takes an agreed upon percentage of the company’s credit card sales every day until the advance is paid off. The interest for a merchant cash advance is often called a premium and depends on both the provider and the company.
Pros
Cons
A merchant cash advance is a great choice for a business that needs a small amount of cash quickly and for a short amount of time. Because the interest is often so high it’s best if your business’s credit cards sales are high so that the advance can be paid back within a year or sooner. Make sure you do your math and calculate the interest you’ll be paying, a merchant cash advance might seem like a good idea but it also might not be the best option for your company.
Business credit cards are very similar to personal credit cards and therefore are a great option for companies that need a little extra cash each month to buy office supplies, inventory or pay for small equipment updates or repairs. Therefore, a business credit card is not a good alternative option for a company that can’t get approved for a business loan but still needs a large sum of capital.
Pros
Cons
If your choose to apply for a business credit card make sure that you understand all of the restrictions and that you only use it for short term expenses, a business credit card is not an alternative for a long term bank loan.
Commercial real estate loans are used specifically to help companies purchase the real estate they need to run their business. This includes, retail space, office buildings and warehouses. Commercial real estate loans are not mortgages but they are similar in that they are both long term loans, unlike most alternative financing options which are typically short term.
Any commercial real estate that a company already owns can be used to leverage another general purpose loan. Therefore, if you’re having trouble getting a business loan from a bank you should consider using any commercial real estate you own to improve your chances of being approved.
Pros
Cons
If you own a company that requires any kind of real restate to run then this is definitely the type of loan you should look into. Because it’s more specific than a general purpose business loan there isn’t as much competition, but the application process will be similar to that of a bank loan.
Most banks and private lenders offer loans to businesses that need to purchase equipment. This is a very specific type of loan and should be used to purchase items like machinery, computers and other technical equipment. Obviously this will all depend on what kind of business you run.
On the other hand, businesses that have already purchased equipment can use it as an asset against another general purpose loan.
Pros
Cons
Any business that requires any kind of equipment should look into applying for an equipment loans instead of a general business loan. Less people apply for equipment loans and because the equipment you purchase will be used as collateral it’s relatively easy to get approve.
Business acquisition loans are for individuals or companies looking to purchase or acquire another already existing business. Most business acquisition loans are approved based on the assets an individual or company has or on the assets that the business being purchased has. The amount of money that will be loaned is based on these assets.
Pros
Cons
Because you’re planning on purchasing an existing business that you did not build from the ground up it’s of the utmost importance that you do your research and analyze the business before making any decisions. And make sure the lender you’re planning on working with has experience with business acquisition loans.
Peer-to-peer lending has, in the past several years, been made popular by the Internet. Simply put, it’s when one person loans money to another person without going through the formality of a bank or traditional financial institution. Peer-to-peer lending usually happens through an online network, here’s what happens.
Pros
Cons
This type of loan is most useful for a company who needs a lot of cash to run their business. Again it’s up to you to do the research as there are many peer-to-peer network sites and not all of them will be trustworthy.
Rating of 5/5 based on 3 votes.
Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.
Whether you have good credit or poor credit, building financial awareness is the best way to save. Find tips, guides and tools to make better financial decisions.
Aeroplan is a well-known travel rewards program run by Air Canada. The Aeroplan program boasts millions of members and is considered Canada’s top trav...
40 standout leaders in the Fintech space were awarded a Leaders in Lending Award by the Canadian Lenders Association.
All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan.