Credit cards are another cash flow management tool, one used by many small business owners

Credit cards are another cash flow management tool, one used by many small business owners

Business Credit Cards

Approval is typically quite fast, and you can apply online in minutes. Many business credit cards offer the ability to earn perks such as miles on airlines or cash back.

Like a line of credit, when you pay off some of what you owe on a business credit card you can use that capital again, if need. But unlike a line of credit, they charge extremely high interest rates. The lowest quoted rate for a business credit starts around % and can go all the way up to %. Unless you have excellent credit your interest rate will be at the higher end, and is likely to be more than the rate you would get on a bad credit line of credit.

You could wind up paying even more than this rate, as many credit card companies raise your rate if you miss a payment or make a late payment. It is also not uncommon for them to charge an annual fee, and you have no control over when the company will raise it.

And unfortunately, small business owners with credit scores below 690 might not be approved for a business credit card. When deciding whether or not to open a business credit card, keep in mind that the credit limit you are given might not be high enough to satisfy your business need. Also, if you immediately max it out, it will further hurt your credit score.

Fast Business Loans from Alternative Lenders

A fast business loan has a term of no longer than two years. For business owners who dislike variable monthly payments, it will be a fixed-rate loan. The payment will not vary and you will be able to budget repayment for the future. Alternative lenders who offer fast loans lend smaller amounts of capital to hedge their risk, but it could be all that you need.

Alternative lenders also lend for shorter periods of time to lessen their risk of non-payment, which again could suit your business needs. But a shorter repayment period also leads to a higher monthly payment. For example, a $12,000 loan repaid over six years has monthly payments of $167, but repaid over three years the payment jumps to $333.

Before you apply for any kind of working capital loans bad credit, calculate your free cash flow and check your budget to make sure that you can make paydayloanstennessee.com review payments. Lenders who offer fast loans also make repaying them easy. You can set up monthly, bi-weekly, weekly, or even daily payments to automatically deduct from your bank account.

Merchant Cash Advances

A merchant cash advance or MCA is another option for a business loan for cash flow. It’s particularly helpful if your sales tend to fluctuate and you know you can repay the loan quickly. That is because a MCA is borrowing against your future sales.

To figure out how much they will give you, the lender will ask to see credit card or bank statements from which they will calculate average cash inflow. All that concerns them is that you have money coming into the business, so qualifying for a MCA can be easy and quick.

For a business which struggles with cash flow, this could be a great option as you don’t repay the advance until money is coming into the business. However, MCA’s are repaid when the lender takes a percentage of each sale. That percentage includes principal repayment and their profit.

The interest rates on a MCA start at 15% and can rise up to triple digits. Many lenders have language in their agreement that allows them to continue to raise the rate if it is taking too long for them to be repaid. A fast loan, business credit card, or bad credit business loan could all have a much lower cost of capital.

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