Businesses Have Other Alternatives Than Taking Out Bank Loans

Businesses Have Other Alternatives Than Taking Out Bank LoansSmall businesses have been struggling through these tough economic times, but now there are options other than taking out bank loans. A recent New York Times article came up with some creative alternatives to help out small businesses that are struggling. A lot of these alternatives are, however, more expensive than traditional bank loans. So typically they is used as a last resort; however some of these options are becoming less expensive as they become more popular.

One of the first alternatives is asset-based lending. Companies will sell their receivables, or invoices to a factoring company. This gives the company 80 to 90 percent of the value upfront and the rest when the invoices are paid off. Usually business-to-business companies will use this method. The cost of this method is 4 to 5 percent a month and the interest rates can vary from 18 to 30 percent.

Lease-back is another alternative that allows companies to sell their real-estate for cash and then lease it back to themselves. Usually companies who have warehouses will look into this process. The cost of the lease-back is a monthly payment for the lease, where there had previously been no payments.

Then, there are cash advances, this is when a business receives a lump sum from a lender, then takes a percentage of the business’s daily card receipts until the loan is paid. Businesses who use this method are predominately restaurants and other retailers. The cost is 20 percent or higher, dependent upon the lender. These are just a few of the many different options that a business can use, if they do not want to go through a bank.

If your business needs legal help, whether you need a loan or not, be sure to contact an attorney as soon as possible. Contact The Gierach Law Firm today.