Financial challenges are common issues for most businesses due to the many things to take care of. Managing all the costs and taking care of everyday expenses can be tricky. Again, paying upfront for a business need is often almost impossible until a business has gained significant growth. Funding becomes a circular problem. Investing in Elan Squared, an Australian financial planning software will help your business long-term in keeping track of accounts and budgeting.
However, financial improvement comes when business needs and operations are handled accordingly. Otherwise, a business only struggles. The good news is that an online business loan can be the solution.
While taking debt scares many small business owners, an online loan can assist with financing and bring even higher returns. Today an online business loan is an excellent alternative to an SBA PPP loan for small businesses to cater to different needs like payroll, utilities, rent, and more.
Here are five ways online business loans can improve a business’s financial position and that of the owner.
Through an Online Term Loan
An online term loan is essentially the kind of loan a borrower thinks of when applying for a traditional loan. The lender pays the amount in a lump sum, the loan accrues interest, and the borrower pays back with monthly payments.
Whether you’re looking for a small loan, or car finance, an online term loan is excellent for a business owner who needs to make a large purchase or needs a substantial cash amount to get their business off the ground or finance a big project. Online term loans may be provided on a short or long-term basis and are suitable for businesses with predictable payment schedules.
Through Equipment Financing
Regardless of the industry a business is in, it needs equipment, machinery, or tools to run the operations. Financing equipment needs can disrupt cash flow and other business operations. However, through online equipment loans, a lender can cover part of or the entire equipment cost, be it purchasing, repair, or leasing. Most of the time, it is financially challenging to pay for other costs and also afford the equipment. That is why obtaining an online equipment loan is always something to consider.
Equipment financing is typically easier to qualify for since it has built-in collateral (the funded equipment). However, a borrower ends up paying more than the actual equipment cost at the end of the period. Therefore, businesses must ensure that the equipment will generate revenue to outweigh the interest payments.
Through a Business Line of Credit
With a business line of credit, a business operator qualifies to borrow a certain amount (usually predetermined by the lender) and draw against it when needed. Generally, a line of credit has lesser borrowing limits compared to other loans like term loans.
The interest a line of credit accrues is only on the amount a business draws against. Businesses or borrowers can repay and reuse the credit within the draw period.
A business can improve its financial position through an online line of credit, especially during a gradual need for access to funds. This option is ideal for short-term financing needs like seasonal expenses, purchasing inventory, marketing campaigns, or other unanticipated costs. It works wellfor businesses challenged by irregular cash flows and cannot access loan funding.
The good thing about a line of credit is that it is a kind of revolving credit; hence loans do not need reapplication.
Through a Merchant Cash Advance (MCA)
An MCA is a cash advance or upfront payment a business obtains in exchange for its future credit sales. It is an excellent way for a business that primarily processes credit card payments seeking for upfront capital to obtain funds.
A business with high sales volumes, for example, during peak seasons with poor credit and in need of quick cash access, can highly benefit from an MCA. Unlike most online business loans, an MCA does not punish borrowers with slow revenue since lenders take a percentage of credit card sales. If they are less, a lender takes less and vice versa.
MCAs can be good short-term fixes for business finances, but businesses must also ensure they do not get stuck in continuous cycles of everyday payments since MCAs are relatively expensive.
Through Invoice Factoring or Financing
Invoice financing enables a business to obtain immediate funding as a percentage of unpaid invoices. Typically, a business sells its outstanding invoices and remits the advance with fees over a set amount of time. If a business is challenged by collecting its invoices, it can approach an online lender for invoice factoring.
Most times, unpaid invoices contribute to cash flow issues, and ultimately taking care of operating expenses becomes challenging. However, through invoice factoring, a business can quickly obtain working capital.
The factoring company collects payments from customers, and after the invoice is paid, a business gets the remaining amount without the factoring fees. Invoice factoring can be a good option for businesses that have not yet established solid credit since the factoring company looks at the clients’ creditworthiness, not the business’s.
Final Thoughts
Many businesses experience financing challenges due to various reasons. However, businesses needing a financial boost can obtain business loans online.
Online business loans can easily finance nearly any business expense- working capital, inventory, equipment, and cash flow management. They are more accessible with easier qualification requirements and are approved faster than traditional loans.
There are many avenues for borrowing online funding with different terms or requirements.
Business operators must therefore do adequate research and compare them to find the best fit for specific situations.
