Today, the Wall Street Journal features an article focusing on asset-based lending.  “Because asset-based lenders focus on collateral, rather than credit-worthiness, they do deals that more traditional lenders shy away from. Borrowers put up equipment, inventory, accounts-receivable and other liquid assets in exchange for the money,” wrote Kyle Stock.  Stock also explains that these lenders have the legal right to seize assets, should the borrower miss payments.

An article in the New York Times last week, addresses a business funding method called purchase-order financing.  With this method, the lender pays a factory to manufacture goods and pays for the goods to be shipped.  After the lender is paid for the merchandise and his services, he then hands over the rest of the money to the customer (the business that borrowed the money).

The merchant cash advance of course, is another alternative business funding method.  Small business owners can get up to $500,000 for their businesses through this method.  However, unlike asset-based lending, the merchant cash advance is unsecured, and merchant cash advance providers will not seize borrowers’ property if their sales are slow.  Also, instead of taking the money for purchases from a business and then allocating it back to the business, minus the borrowed amount and service fees, merchant cash advance providers only take a small percentage of a borrower’s daily credit card sales, allowing them to receive the revenue from their customers’ purchases as they are made.