A merchant cash advance can be considered a risky move for some businesses. Thankfully, there are some alternatives that may seem better and less dangerous. These alternatives may help your company when you need capital the most.
Business Loan
Many companies choose to get a merchant cash advance because they’re fast and accept bad credit, but the terms are much riskier. A small business loan is another option to getting a merchant cash advance. It takes longer to get a business loan and requires more paperwork, but the rules and regulations are tighter. The interest is also much lower than you may find with a merchant cash advance. Credit unions are more likely to offer business loans to a company with less than perfect credit.
Investors and Venture Capital Firms
If you find yourself needing a merchant cash advance for growth reasons, you may also consider finding an investor or venture capital firm to capitalize on your plan. The process can be very complicated, but these types of investors are willing to back you in exchange for equity or partial ownership of the business. Small shops have the ability to use the Small Business Association’s (SBA) Investment Company Program to find possible lenders. This long-term capital program allows finances to small businesses during times of growth or economic hardship.
Economic Development Programs
Financing can also be found depending on how you classify your business. For example, if you are a woman, you may be able to get your business classified as a woman-owned business—which gives you the opportunity to find funding through economic development programs directed toward women. Another example would be location; if your business is located in an economically disadvantaged region, you may qualify. For more information on economic development programs, visit the SBA’s website.
Government Grants
The government has a number of grants for businesses on its website, Grants.gov. This site is a catalog of over 1,000 grant possibilities through government offices, associations, and programs in the United States. Grants can be sorted based on categories, agencies, and eligibilities. New awards are posted on a daily basis, and the site even assists you in signing up if you are new.
Corporate Programs
Big companies offer small businesses start-up support and low-interest financing. One such company is Michelin through Michelin Development. They provide loans of up to $50,000 with a 2% interest rate. Acceptance of these corporate programs vary, so it may not be an option for every business. Many corporate programs focus on providing funding to businesses owned by women or those in a low economic position.
