Small company loans can be an essential source of cash for companies lacking the credit history or other qualifications to qualify for more conventional financing like venture capital or angel investment.
Both the borrower and the lender benefit from the steadiness and predictability of a term loan. The borrower can prepare and stick to a budget ahead of time because the loan terms are often designed with a fixed interest rate and payback schedule.
A lender makes money available to a small business on an as-needed basis. Think of it like a credit card account. Only the amount borrowed is subject to interest, and when the loan is repaid, the available credit is increased.
A corporation uses invoice or receivable accounts financing to sell its unpaid bills to a third-party lender at a discount. The creditor loans the company a portion of the value of the late invoices in advance and recovers the total amount from the clients when the bills are past due.