Loans
photo credit: Omar Omar

In today’s economy businesses, especially small businesses, need lending and it’s no surprise that banks are still leery of lending out huge sums of money to businesses on the off chance that they go under. I recently came across a great article located on Open Forum that offers some great alternatives to obtaining bank loans:

Peer to Peer lending is a great service that can be located online at places such as Lendingclub.com and Prosper.com, where small businesses can set up profiles stating the amount they need and what they are planning to use it for. Then various lenders are able to search through these profiles and offer their lending services to those they are interested in.

Factoring. Otherwise known as receivables financing, a factor advances businesses 70% to 90% of the value of their receivables and then assumes responsibility for collecting the money. While CIT has been a big player in this arena, there are others, like Wells Fargo, that also do factoring. But there are definite pluses and minuses to this approach. For example, factors get a fee and it can be steep, anywhere from 3% to 15% of the invoice. And, if the customer doesn’t pay, “The small business eats it,” says Olp. On the other hand, you can often get your money in just 24 to 48 hours.

Small businesses also have the option to work out some sort of supplier credit with their suppliers. This allows the small business to set up special payment terms and credit advances that allow them to have more cash on hand and lower payments with longer times to pay back the credit.

For the full list of alternative options to bank loans, visit Open Forum.