Consider some of the most common cash loans to find the loan that meets your business’s short- or long-term cash flow needs.
Short term loan
Like traditional small business loans, lenders disburse short-term business loans as a lump sum that the borrower repays over time. As the name suggests, repayment terms are brief and usually range from three months to 18 months. Payments can be due weekly or daily, making it difficult for businesses to repay.
Interest rates range from about 3% to 50% or more, and loan amounts can reach $1 million or more. Short-term loans are best suited for businesses that need a lump sum of cash to make a purchase or investment that will immediately solve cash flow problems and generate income.
Commercial lines of credit
A business line of credit is a revolving line of credit that allows business owners to borrow money as needed. Businesses can use the funds for a variety of purposes and interest only accrues on the outstanding balance. Since lines of credit are revolving, borrowers can reuse funds as they pay down their balance.
Borrowing limits generally extend up to $250,000, with interest rates between 10% and 99%, although this varies by lender. Unlike some cash loans, lenders consider the borrower’s creditworthiness when evaluating an application. Borrowers must have a personal credit score above 700 to qualify.
Invoice financing is a type of short-term loan that allows business owners to borrow against their outstanding invoices. With this type of cash loan, the lender advances a portion of unpaid bills, usually up to 90%. This can be a good option for businesses that need cash fast but have customers with long payment terms (like 30, 60, or 90 days).
Once the customer pays the bill, the lender returns the remaining balance to the business owner minus the fees. Interest rates are usually between 0.5% and 5% per month, plus an additional factor fee based on how long it takes the customer to pay their bill. Loan amounts depend on the value of a company’s outstanding invoices.
Since invoice financing relies on paying a customer’s invoices, eligibility determinations are based more on the customer’s payment history than the company’s creditworthiness. For this reason, invoice financing can be a good option for businesses with a limited credit history but reliable customers.
Cash Advances to Merchants
A Merchant Cash Advance (MCA) allows business owners to access a lump sum cash payment that is repaid directly from the business’s future debit and credit card sales (typically between 5% and 20% of each transaction). Loan amounts are flexible and can be up to $500,000 or more, depending on the lender.
That said, repayment times can be short, so this type of financing is best for businesses with high sales volume. Interest rates are also much higher than other business cash flow loans and can go up to 350%. Additionally, additional fees may increase the overall cost of borrowing.