Your comprehensive guide to understanding business funding options, terminology, and how to choose the right financing solution for your business.
Business financing can seem complex, but understanding a few key concepts will help you make informed decisions about funding your business. Let's break down the fundamentals.
APR represents the yearly cost of borrowing money, expressed as a percentage. It includes interest and fees, making it easier to compare traditional loans. For example, a $100,000 loan at 10% APR means you'll pay approximately $10,000 in interest over one year (though actual payments depend on the amortization schedule).
Factor rates are commonly used in merchant cash advances and short-term financing. Instead of a percentage, you see a decimal like 1.15 or 1.30. This number is multiplied by your funding amount to determine your total repayment. For example, $100,000 × 1.20 = $120,000 total repayment, meaning you'll pay $20,000 in fees regardless of how quickly you repay.
Quick access to capital based on your future sales
A merchant cash advance (MCA) provides upfront capital in exchange for a percentage of your future credit card sales or daily revenue. Instead of fixed monthly payments, you repay through automatic daily or weekly deductions that fluctuate with your sales volume. This makes MCAs particularly attractive for businesses with seasonal revenue or variable cash flow.
MCAs are one of the fastest funding options available, with approvals often within 24 hours and funding in 1-3 business days. Because repayment is tied to your revenue, you pay more during busy periods and less during slow periods, providing built-in flexibility. However, MCAs typically have higher costs than traditional loans due to their speed, flexibility, and accessibility.
Flexible revolving credit for ongoing expenses
A business line of credit works like a credit card for your business—you're approved for a maximum credit limit, and you can draw funds as needed up to that limit. You only pay interest on the amount you actually use, and as you repay, your available credit replenishes, giving you ongoing access to capital.
Lines of credit are ideal for managing cash flow gaps, covering unexpected expenses, or taking advantage of time-sensitive opportunities. They provide the flexibility to access capital when you need it without the burden of paying interest on unused funds. Many businesses use lines of credit as a financial safety net, drawing on them during slower months and paying them down during peak seasons.
Fund day-to-day operations and short-term growth
Working capital loans provide the funds you need to cover everyday business expenses like payroll, rent, inventory, and utilities. Unlike loans designated for specific purchases (like equipment), working capital can be used for any business purpose, giving you maximum flexibility to address your most pressing needs.
These loans are particularly valuable for businesses experiencing growth, as expansion often creates cash flow challenges even when sales are increasing. Working capital loans bridge the gap between when you need to pay expenses and when customer payments arrive, allowing you to maintain smooth operations and seize growth opportunities without cash flow constraints.
Government-backed financing with favorable terms
SBA (Small Business Administration) loans are partially guaranteed by the federal government, which allows lenders to offer more favorable terms than conventional loans. These loans typically feature lower interest rates, longer repayment periods, and lower down payment requirements, making them an attractive option for established businesses with strong credit.
While SBA loans offer excellent terms, they come with a more rigorous application process and longer approval timelines than alternative financing options. You'll need detailed financial documentation, a solid business plan, and typically at least two years in business. However, for businesses that qualify and can wait for approval, SBA loans provide some of the most cost-effective financing available.
Finance the equipment your business needs to operate
Equipment financing allows you to purchase or lease business equipment—from vehicles and machinery to computers and restaurant equipment—without paying the full cost upfront. The equipment itself serves as collateral, which often makes approval easier and rates more favorable than unsecured financing.
This type of financing preserves your working capital for other business needs while allowing you to acquire the tools necessary to operate and grow. Equipment financing can cover new or used equipment, and terms are typically structured to align with the useful life of the equipment. Many businesses appreciate that equipment financing keeps their equipment current without large capital outlays.
Scale your business with confidence
Expansion and inventory financing provides the capital needed to grow your business—whether that means opening new locations, entering new markets, launching new product lines, or stocking up on inventory to meet increased demand. These loans are designed specifically for growth initiatives that will generate future revenue.
Growth often requires significant upfront investment before new revenue materializes. Expansion financing bridges this gap, allowing you to invest in growth opportunities without depleting your cash reserves or compromising day-to-day operations. Lenders evaluate these applications based on your growth plan, current business performance, and the potential return on investment from the expansion.
| Product Type | Speed | Cost | Flexibility | Typical Uses |
|---|---|---|---|---|
| Merchant Cash Advance | Very Fast | Higher | High | Urgent needs, seasonal inventory, equipment repairs |
| Line of Credit | Fast | Moderate | Very High | Cash flow gaps, ongoing expenses, opportunities |
| Working Capital | Fast | Moderate | Moderate | Payroll, rent, inventory, general operations |
| SBA Loans | Slow | Lowest | Low | Real estate, major expansion, large equipment |
| Equipment Finance | Fast | Low-Moderate | Moderate | Vehicles, machinery, technology, restaurant equipment |
| Expansion Financing | Moderate | Moderate | Moderate | New locations, bulk inventory, growth initiatives |
Understanding what lenders look for can help you prepare a stronger application and improve your chances of approval. While specific criteria vary by lender and product type, most evaluate these key factors:
Your monthly and annual revenue demonstrates your ability to repay funding. Lenders typically want to see consistent revenue over several months and sufficient cash flow to cover both your existing expenses and new funding payments. Higher revenue generally qualifies you for larger amounts and better terms.
Business longevity indicates stability and reduces lender risk. Most alternative lenders require at least 6 months in business, while traditional lenders and SBA loans typically want 2+ years. Newer businesses can still qualify but may receive smaller amounts or higher rates initially.
Your business bank statements reveal your actual cash flow patterns, average daily balance, and financial health. Lenders look for positive balances, consistent deposits, and manageable expenses. Frequent overdrafts or negative balances can be red flags, while strong, steady activity improves your application.
Both personal and business credit scores are considered, though their importance varies by lender. Alternative lenders are often more flexible with credit than traditional banks. Recent bankruptcies, liens, or judgments may impact approval, but many businesses with credit challenges still qualify based on strong revenue and cash flow.
Some industries are considered higher risk than others, which can affect approval odds and terms. Lenders prefer businesses with proven, sustainable business models and diversified customer bases. Seasonal businesses can still qualify but may need to demonstrate strong peak-season performance.
Lenders evaluate your current debt load to ensure you can handle additional payments. They calculate your debt service coverage ratio—the relationship between your cash flow and debt obligations. Too much existing debt may limit how much additional funding you can qualify for, but manageable debt with a strong payment history can actually help your application.
Navigating the business funding landscape can be overwhelming. That's where Astravest comes in. We simplify the process and maximize your chances of getting the right funding at the right terms.
Instead of applying to multiple lenders individually, submit one application through Astravest and receive offers from our entire network of lending partners. This saves you time and gives you options to compare side-by-side.
We present all offers with clear, easy-to-understand terms so you can make informed decisions. No hidden fees, no confusing jargon—just straightforward information about rates, repayment schedules, and total costs.
Our streamlined process and strong lender relationships mean you get funding decisions in 24-48 hours and funds in your account in as little as 1-3 business days. When opportunity knocks, we make sure you're ready to answer.
Our funding specialists help you understand your options and choose the product that best fits your business needs, cash flow, and growth plans. We're here to answer questions, explain terms, and ensure you feel confident in your decision.
Get started with a simple application and receive multiple offers from our trusted lending partners.
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