A great advantage to unsecured business loans as opposed to normal bank loans is that there is no collateral needed to back them up. These unsecured business loans can be given on the basis of the credit worthiness of the entrepreneur, and are often times referred to as signature loans. However, unless you are on excellent footing with a private lending institution, or your business has an outstanding credit rating, it is highly unlikely that you will be approved for a very large loan amount – that is if you can manage to get one at all.

If your business’s credit score is not well built, but you yourself do have excellent credit score, it is possible that you may be able to get unsecured business loans with a personal guarantee. Still, this brings to the forefront your personal monies, as you become the person of last resort if your day to day business functions cannot meet the loan obligations.

On the other hand, it is much simpler to attain funds from Credit Card Factoring (a.k.a. business cash advance), which doesn’t rely on your credit history because it isn’t a loan. Credit scoring doesn’t usually play a very significant part in the approval cycle for a business cash advance, because it is repaid from the credit card receipts generated on a daily basis by your business.

The business cash advance really comes from the discounted purchase of a percentage of your future Visa-MasterCard receipts by the cash advance provider, so it does not force you to make fixed monthly payments like a normal bank loan requires. You should stay away from entering into an agreement with any business cash advance cash advance provider that mandates you to put up collateral or give a personal guarantee – this is simply not required for this type of product.

The approval chances for a merchant cash advance is way larger than that of unsecured business loans, and it is possible that you will be able to get a larger amount of working capital with this method, as well.

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For those entrepreneurs with less than stellar credit, credit card funding may become a necessary part of small business costs. The advantage of using credit card factoring to finance needed purchases is that there really is no limit placed on what you can buy. The funds can be utilized to acquire equipment, repair or remodel a storefront or even pay off taxes.

As one would expect, credit card funding carries higher interest rates than those obtained through a more traditional venue, such as you local bank. This means that over the life of the loan, you pay more back for the privilege of quick access to capital and fewer demands. On the other hand, for those who use credit card funding, the repayment rate is often tied directly to the credit card receipts of the company, thus eliminating concerns over not having enough to make the monthly payment and keep up with other business obligations.

Additional advantages for the small business owner seeking financing through credit card funding include:

§ No Collateral required

§ No points to generate the loan

§ No restrictions on the funds

§ No set payment schedule

§ Quick processing

§ High Approval Rate

Even though credit card funding does offer financing options to a larger number of entrepreneurs, there are some fairly specific requirements to qualify. Each funding company has different stipulations, but the following are common.

• The merchant must have been in business for 6 months to a year
• The merchant must have at least 6 months of credit card processing with a stated minimum amount of credit card business monthly
• The merchant must have a verifiable lease that will last for at least one more year
• The funding company may require transfer of all credit card processing to their machines
• The business type must be acceptable and legal

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Credit card factoring is a little known financial practice that provides needed cash to merchants through their credit card processor. Few business owners realize that they have this option and head straight to family or a bank when they need money to pay for expansions, repairs or upgrades of their stock and equipment. If you are a business in need or cash quickly, you should look into factoring as well.

The concept behind factoring is something like selling futures. You, as the business owner, agree to sell future profits at a discount to the factoring company. The cash is provided now in exchange for anticipated receipts in the next several months or years. These arrangements are for the short term, rarely more than 5 years, and are a viable way for a company with a proven credit card sales history to obtain needed money.

Unlike a bank loan, where the repayment schedule is fixed for the life of the loan, a factoring agreement takes into account the fact that in every business there are busy months and slow ones. Your payment is directly tied to your credit card sales, as a percentage, not a set fee. If you have agreed to pay 10% per month and you take in $8,000 one month, your payment that month is $800. In another month you may take in $10,000 and pay $1,000. This flexibility is a wonderful asset for a growing company.

Another benefit of credit card factoring is the speed in which the money turns up in your hand. While a bank may take several weeks of deliberation and dictate how you use the money when and if they give it to you, with a factoring agreement, you will have the money in about a week, and you can apply it to whatever you deem fit.

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