Lynxmoor Capital, a small-business funding service in Alexandria, LA, compares six funding types for Rapides Parish owners: working capital, term loans, lines of credit, inventory financing, equipment financing and merchant cash advances. The right one depends on the expense, how fast money returns and what records you can show a partner.
Lynxmoor's six options, row by row
| Funding type | Typical use | Repayment pattern | Records a partner reads first |
|---|---|---|---|
| Working capital | Paychecks, the lease and supplier bills | Fixed payments across a short span of months | Statements, revenue, years open |
| Business term loan | Growth projects, fit-outs, another site | Level installments for a fixed span | Financial statements, purpose, collateral where asked |
| Line of credit | Uneven weeks, late payers | Interest on the drawn balance; repaid sums reopen | Cash-flow history, revenue consistency |
| Inventory financing | Stock bought ahead of the sale | Repaid as the financed goods sell or on a schedule | Stock records, sales history, vendor invoices |
| Equipment financing | Machines and gear, new or second-hand | Loan or lease payments; the item usually secures it | Quote or invoice, equipment age, business records |
| Merchant cash advance | Short-term needs for card-heavy sellers | Collected as a share of daily card sales; not a loan | Card processing statements, deposit history |
Five expenses and where each one points
Payroll. Wages that fall due before an insurer, a general contractor or a client pays belong on the working capital page.
Inventory purchases. Shelf stock, fuel-store goods and pharmacy orders are covered on inventory financing.
Second-hand, kitchen or job-site equipment. Age, hours, dealer versus private sale and lease choices are explained on equipment financing.
Seasonal or uneven months. A revolving limit is explained on the line of credit page.
Growing, or opening another site. Fixed-schedule money for growth is on business term loans.
Collateral or no collateral on a business loan
A secured agreement names collateral, such as the equipment being bought, receivables or other business assets, that the partner can claim if payments stop. An unsecured agreement names no specific asset, though partners often still ask for a personal guarantee from the owner. Whether a request ends up secured is the partner's call, based on the purpose, the amount and the records.
Read the security section of any offer slowly. A blanket lien on all business assets reaches much further than a lien on one truck.
Business purposes a loan can and cannot cover
Business purposes: wages, rent, materials, equipment, stock, build-outs, buying out a partner's share of equipment, or refinancing a costlier agreement. Partners usually ask what the money is for and may limit the use in the agreement. Personal spending, real estate purchases and anything outside the business are not what these programs are for.
The four types of business loans, and two more options
Business loans are often sorted into four types: term loans, lines of credit, equipment loans and working capital loans. Lynxmoor adds two more funding types that work differently: inventory financing, which ties the money to stock, and the merchant cash advance, which is a purchase of future card receipts rather than a loan.
Not sure which applies? Each funding type is matched to local trades on the industry pages.
Questions to answer before choosing among the six
- What exactly will the money pay for?
- When does that cost come back to the business, if ever?
- Will this cost come once, or keep coming back?
- Is there an asset, such as equipment or stock, that could secure it?
- Which records can you show today?
A one-time cost with a long payback points toward a term loan or equipment financing. A recurring, short gap points toward a line of credit or working capital. Card-heavy sellers can also weigh a merchant cash advance, which is collected from sales and is not a loan.
By Lynxmoor Capital · Updated