De MoínaWiki

Running a business is difficult. Taking care of customers is tough enough, but there's a whole dimension for your business that customers never even see. Inventories have to be restocked, equipment must be repaired and upgraded, and staff must be paid. There's a lot of truth to that old saying, "You gotta spend some money to make money." However when you find yourself low on working capital, how will you keep your business continuing to move forward?

Small business owners are faced with a confusing number of funding options, so many that it can be near on impossible to dig through all the offers and know what's the right one for the business. So let's break down the difference between the 2 major types of small business financing:

Small company Bank Loans

This is the most common way people search for working capital, and may be the one you're most acquainted with. After submitting the application to the bank, they'll examine a number of factors as well as your credit history and also the amount of collateral place up. If your application qualifies, you'll receive your lump sum payment bank loan and become expected to repay it by a certain date. Usually, the borrowed funds will come with fixed repayment installments that must be met or penalties can occur.

Who it's best for: Small businesses with totally predictable monthly sales, strong credit history, and own their very own real estate that they can put up as collateral.

Merchant Cash Advances

Many merchants don't know about the existence of this funding option. Merchant payday loans differ from small company loans in that they are a purchase of future charge card sales. Unlike a conventional loan, it isn't based on your personal history and instead on how much business you're doing. This will make it ideal for business people who don't have perfect credit or who don't have collateral to place down. Rather than fixed payments, you repay a collection percentage of your credit card sales - when clients are slow, you pay less and when business accumulates, you pay more off. This is advantageous for seasonal businesses or businesses whose monthly receipts tend to vary.

Who it's best for: Smaller businesses whose receipts vary every month, owners with less-than-perfect credit rating, have no collateral or would certainly prefer more flexibility.

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