It's all well and good to know how each of these sources work, but deciding which one is best for you means understanding the pros and cons of each.
According to Sihler, finance companies might be good for entrepreneurs seeking loans of $250,000 or less with quality assets, particularly seasonal ones. Additionally, firms that are producing pre-sold inventory for financially reliable clients like the government or a Fortune 500 company may also want to explore this route.
Borrowing against life insurance could be a smart move because some older policies have interest rates as low as 5 percent, says Sihler. But be aware there might be some negative tax implications. For example, the interest paid on this loan may not be deductible as a business expense.
Whatever source of lending you choose, it's still important to do your homework. You need to determine whether the lender knows enough about your business to weather the ups and downs with you. Will the relationship be here today and gone tomorrow, or can the resource meet your firm's future financing needs? Finally, examine whether the loan will help or hinder you in the short and long term.
Once you know the answer to these questions, your choice should be clear.
AT&T Capital Corp., 44 Whippany Rd., Morristown, NJ 07962, (800) 221-7252
Alternative Federal Credit Union, 301 W. State St., Ithaca, NY 14850, (607) 273-4666
American Express Small Business Services, (800) SUCCESS, http://www.americanexpress.com/smallbusiness
Citizen Equity Federal Credit Union (CEFCU), P.O. Box 1715, Peoria, IL 61656, (309) 633-7000
Countrywide Home Loans, (800) 570-9888
Credit Union National Association, (202) 218-7748
Custom Data Services Capital, (800) 338-7353, http://www.cdscapital.com
Heller Financial Inc., 500 W. Monroe St., Chicago, IL 60661, (312) 441-7000
Manchester Commercial Finance LLC, IDS Center, 80 S. Eighth St., #3640, Minneapolis, MN 55402
The Money Store Inc., 3301 C St., #110-M, Sacramento, CA 95816, (916) 446-5000
Pivot Rules Inc., 42 W. 39th St., 9th Fl., New York, NY 10018, (212) 944-8000