Unsecured business loans aren’t for everyone. Namely, startups. They are, however, great options for savvy business owners who’ve started turning a steady profit and are looking to expand their business, launch a marketing campaign, fulfill a government contract, or otherwise make a deep and speedy investment in their biz.

Business growth is a huge investment; it takes a lot of working capital. Many businesses opt to use loans from the bank or their own retirement money for that working capital, but unsecured business loans provide a viable alternative to those traditional methods because they shorten your wait time for funds and are not dependent upon your personal credit.

These specialty loans should be used with caution, however.

Unlike traditional loans, they are repaid through your business’s future sales. So, to take out a loan, you’ll need to be confident that your borrowed funds will quickly turn into a high profit margin for your business. Of course, there are many situations in which that’s possible, but there are likewise situations when that isn’t the case—like a bailout, or a long-term expansion plan.

Remember, unsecured business loans are for established businesses that having a promising future.

There are two types of unsecured business loans: merchant cash advances and business cash advances.

Merchant Cash Advances

A merchant cash advance lends cash to businesses that show potential earnings in the future, and the funds are usually available in 3-5 business days (much faster than a business loan). Once you have the cash, what you do with it is up to you, but have a clear plan before you borrow.

The loan is then paid back through a daily percentage of your business’s credit and debit card sales. That percentage is taken out until the loan is paid back, and is deducted at the card terminal, immediately upon swiping. One benefit of this is that amount of funds daily repaid adjust depending upon your daily sales, so you repay more when you can afford to.

What you owe will be paid back usually within 12 months of taking the loan—making it extra important that you make a profit fast, and with purpose. Planning is crucial to your success.

Business Cash Advances

A business cash advance is the merchant cash advance option for businesses that don’t rely upon credit card processing for their sales. The cash borrowing works the same way, but funds are repaid daily directly from a bank account, either yours, an account you set up between a bank and your lender, or a lockbox account. The percentage repaid daily is set before your contract is signed, so you’ll never have to worry about paying back more than you bargained for.

Unsecured business loans aren’t for everyone, but they might be a great alternative source of funding. Make sure you think before you get one though, and carve out a strong plan to set yourself up for success.

About the Author: Jim Rutherford is an avid reader of Forbes and fishing blogs when he’s not working his day job as a writer for VMC Capital

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