In an environment where businesses have a hard time getting a traditional bank loan, revenue loans have become all the rage. You might have heard about them or gotten calls to your business offering them.
The industry is booming and while they often get a bad rap, revenue loans can do wonders for your business if used correctly. Here are a few key benefits of revenue loans that you can take advantage of to grow your business:
- Cash Fast!
While planning in advance is always best, sometimes life happens and you need funding fast. Revenue loans are most famous for their quick turn around time. From start to end, if you have all your ducks in a row (aka all your documentation at hand), you can get your funding in as little as two days. Even the fastest bank loan will take a minimum of two weeks.
This means if you’re really struggling or have the perfect growth opportunity that needs to happen quickly, you can get a cash injection pretty quickly. For some businesses, this is a real lifesaver.
- No Long-Term Debt
For a business, carrying long-term debt can be a hassle. While having relatively lower monthly payments over 5 or 10 years can be appealing when it comes to things like building a new wing of your business, for certain uses, long-term debt just doesn’t make sense. Why pay off your 2015 inventory in 2025?
You might need funding again in 2016 to sure up some inventory or hire new staff. Having a 5 or 10 year loan on your balance sheet will make it difficult to get additional funding. However, a short-term loan that you know you will be able to pay off in 6-12 months makes more sense for short-term expenses that will boost revenues.
- Grow Your Fledgling Business
What do you do when you’re 10 months into your business and it’s booming? You need more cash to grow, but a bank won’t lend you money because they still consider you a startup. This is where revenue loans are prefect. Banks generally require two years of business tax returns, while most revenue lenders require only 6 months of business bank statements.
While not perfect for brand new startups, you don’t need that much time in business to show your business can repay the loan. This could be great for those businesses with cash flow issues and not enough time in business for a traditional loan.
When it comes to all funding, and revenue loans is no different, the key is to make sure your return on investment will allow you to repay the loan and grow your business. Keeping that in mind, revenue loans is the solution to many business’s cash flow troubles and could be a life saver for yours too.