Hard Money Loans – And Other Non-Traditional Methods in Obtaining Financing For Your Business

A hard money loan allows the borrower to receive a loan based on the value of real estate he or she owns. The real estate is used as collateral. These loans are issued at a much higher interest rate than conventional loans and are not given by any commercial banks but instead are arranged by private investors.

Since the Hard Money loans are made by private investors a borrower’s credit score is not consider due to the fact that the loan is secured by the value of the property that is being put up as collateral. However, with the current state of the real estate market, hard money loans are not that easy to obtain these days since the real estate market has soften and property is selling for far less than what it was a couple of years ago.

Below are a couple of other non-traditional ways to get financing for your business:

Credit card factoring or Merchant advance for small businesses
Credit card factoring also known as a Merchant advance is when a lender gives your business cash upfront based on your future credit card sales. It is paid back by using a percentage of those future credit card sales until the balance is paid in full. The actual amount that the borrower can receive is based upon the business’s monthly credit card receipts.

General requirements for this type of financing:

o You must have owned the business for at least 6 months
o Your business processes a minimum of $2,000 or more in monthly Credit Card sales
o You have no unresolved bankruptcies
o You have at least one year remaining on your business lease

Account receivables or Invoice factoring

Another popular method of business financing is the selling of Account Receivables or Invoices. Businesses that extend credit terms to their customers ie: net 20, or net 30, allows customers some breathing room to pay their bills, however, this arrangement make it necessary for businesses to wait for payments and can sometimes have a stifling affect on cash flow.

A factoring company purchases receivables or invoices by providing you with a cash advance, thus, infusing your company with immediate cash, improving its financial situation. This advanced is any where from 70% to 85% of the value of the invoices or receivables. Most factoring companies charges a fee starting from 2% and it goes up from there.

So, if your business has been decline by traditional lenders, don’t despair help is on the way through these alternative financial sources.