There are a variety of reasons to choose a private business lender. A loan can have many uses, and one of them is that it can help improve cash flow for your business. Here are some of the reasons to choose a private lender as well as an overview of the types of business financing available.
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Reasons to Choose a Private Lender
A private lender can help many small business owners raise capital when needed. It’s easier for people with bad or not great credit to get a loan from a private lender than from a bank or other traditional financial institution. Along with your credit score, private lenders often look at the history of your business, the collateral available, and the company’s cash flow.
Getting a small business loan from a traditional bank usually takes about two to three months. You can get cash much faster from a private lender. In some cases, you can get the money your business needs in only 24 hours. Private lenders have more flexible payment options as well. Many banks require borrowers to pay loans with fixed monthly payments. With a private lender, you can often make payments daily, weekly, or every two weeks instead. Private lenders are also less likely to charge prepayment penalties to people who want to pay off a loan early.
Approval from a bank or credit union usually takes longer because these institutions require more documentation. You could need to provide tax returns, bank statements, credit card statements, and other financial data, and banks often don’t want to lend to businesses that have been open for less than two years. In contrast, private lenders usually only ask for a few months of bank statements, identification, and a copy of your business license.
The Types of Private Business Financing Available
You can choose from several types of private business financing. Here are a few.
Term Loans
With a term loan, you can get a lump sum and then repay it over time with interest. Additional fees, such as loan origination fees and early payment fees, often apply. The interest rate plus any fees is the annual percentage rate (APR).
Equipment Loans
An equipment loan lets you purchase equipment that’s essential for running your business, like commercial-grade appliances or computers. Since the equipment acts as collateral, the interest rates are usually lower than they would be for a term loan with no collateral.
Lines of Credit
You can also choose a line of credit similar to a credit card. Business owners can borrow from it when needed, and a minimum payment is due every month. However, interest rates for revolving lines of credit are usually higher than other types of loans.
Merchant Cash Advances
With a merchant cash advance, a business owner can trade part of their future earnings for an immediate lump sum. People usually repay lenders with a weekly or daily percentage of their business’s credit card sales.
The Choice is Yours
Even when you use a private lender, the company often gets funding from a bank. For example, Western Alliance Bank’s Note Finance group provides funding to private lenders. It works with real estate investment groups, family businesses, asset-based revolving lines of credit, and more. You can get fast, flexible, custom sources of capital through many private lenders. The important thing is choosing the right type of loan and lender for your business.
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