If you have a mortgage, student loan, or car loan, then you’re already familiar with how a term loan works

Term Loans

You borrow a lump sum upfront and pay it back in fixed weekly, biweekly, or monthly payments throughout the term of the loan.

For example, Funding Circle offers term loans up to $1,000,000 with competitive interest rates, terms from 6 mos. to 5 years, and upfront set monthly payments.

Credit Lines

Like a business credit card, a credit line gives you access to cash flow financing that you can tap as you need to cover working capital needs or make investment opportunities.

Unlike business credit cards, credit lines are more formal agreements between financial institutions and borrowers and often require an existing relationship.

One advantage of credit lines is that they tend to charge a lower interest rate than a business credit card.

Invoice Financing

Landing a big contract with a government agency or large corporation is awesome news for a small business owner. It also means that he will have to come up with cash upfront to meet short-term needs to fulfil the www.paydayloansohio.net/ large order.

Invoice financing is cash flow financing by borrowing money based on amounts due from customers. Providers of this type of financing are often financial institutions or the large corporations or government agencies themselves.

Keep in mind that lenders generally pay out about 70% to 80% of the value of qualifying accounts receivable (often those under 90 days, but requirements vary by lender).

Merchant Cash Advance

The merchant cash advance provider gives you a lump sum, which is then repaid automatically using a percentage of your daily credit card receipts.

Depending on the advance amount, terms may be as short as 90 days or as long as 18 months. Repayment begins immediately after the funds are received.

While there are instances where a merchant cash advance is the right financing option for a business, it is important that you understand the true cost of capital. Unlike a loan, a merchant cash advance isn’t assigned an annual percentage rate. Instead, business owners pay what’s known as a factor rate, which can be confusing.