Most people think today’s business owners have it easy since they have technology backing them and helping them in the crucial aspects of management, marketing, and sales. In reality, however, the fundamental struggles of a businessman have not changed since time immemorial. Aspiring entrepreneurs are still knocking on the doors of banks and respected credit unions for funding their ideas and dreams. Technological advancement and the internet have indeed made the alternatives more readily available for these entrepreneurs, but convincing the potential funding companies have not become painless. That is primarily because the easy availability of technology has also made the competition much stiffer for the upcoming and existing businesses. Hundreds of similar companies are vying for the same kind of funds from these lenders every day!
Small business administration loans are the most coveted form of funding for most of the emerging start-ups and SMEs. They are also one of the toughest to obtain since the best rates are only available from the leading banks and credit unions. Most institutions have stringent qualification criteria for SBA loans that not all businesses can meet. If a small business loan lender has rejected your application recently, you do not have to feel dejected. More and more companies are opting for alternative funding sources every day without even trying for SBAs due to the reasons mentioned above. Here are the top 4 alternative funding sources that are helping a significantly large number of business owners realize their dreams.
Crowdfunding
It is a favorite among the millennial entrepreneurs. There are no limits to the types of business ideas or the number of people who can fund them. Crowdfunding has brought a breath of fresh air to the age-old process of business financing, but without the stringent terms and conditions of investor financing or shareholder funding! The contributors do not care about your credit scores or loan history. They only focus on your business acumen and your plans to realize your dreams. As long as you have compelling business process ideas, it will be easy for you to secure funding from multiple sources on a secure platform.
It brings us to the next fantastic part of Crowdfunding – you do not have to run from individual to individual with portfolios in your bag and applications in your folders. With some research, you will come across several online platforms that are the hubs of potential investors. There are equity Crowdfunding platforms and regular venture debt Crowdfunding platforms that can put you in touch with the most rewarding fund sources. Explore several of the available financing options on these platforms, read the terms and conditions carefully, and start building your proposal before approaching your prospective financiers. You can create video or PowerPoint presentation for your donors, funders, and investors!
Microloans
Small is good, but micro is better, at least when it comes to business loans and funding options. Microloans are one of the best prospects for entrepreneurs who do not have access to traditional funding options. Since the term is “micro,” the loan amounts will vary from $500 to $10,000. The Community Development Financial Institutions or CDFIs are the sources of microloans with economic interest rates and APRs.
One huge benefit of getting microloans is the training and assistance coursework that come with the funding. The CDFIs and other lenders offer training and research material to the new businesses to help them succeed and pay off the loan on time. There are several sources of microloans that provide more than $10,000 if the business proposal shows promise. Non-profit micro-lenders are often the best sources of loans for all kinds of businesses.
Invoice financing
It is very similar to Crowdfunding since it does not require any form of credit score verification at all! Since the payment depends on the value of the invoice(s), the companies usually verify the merchant invoices or the supporting sales documents. You can access the pending funds of an outstanding invoice as a part of this process. They often advance a part of the invoice that you furnish and then the rest after the company pays the amount. The financing company deducts their fee from the invoice during the process.
Yes, they are not the cheapest of all financing options, but they are one of the fastest alternatives for business financing. Most business owners prefer invoice cash advances or invoice financing because these companies provide access to the money in less than 24 hours. There are invoice financing companies that cash out more than one invoice at one go.
Credit cards
Most merchants, entrepreneurs and even individual users are terrified of using credit cards as sources of finances. Nonetheless, they are substantial sources of funds for people who do not have much balance on their credit cards. Quick cash becomes a real option for those with business credit cards. You should always compare few business credit card companies before getting your very own credit card for business purposes. Read the fine print carefully before signing on the dotted line!
Business credit cards are separate from personal credit cards. They do not impact individual credit scores. They are usually facilitators of fast, small business loans. Credit cards come handy when making vendor payments and paying utility bills every month. However, these loans can bear significant interest rates and processing fees, which is why you should not be reckless with your spending. Try using a 0% interest credit card for taking out loans and pay more than the minimum installment amount each month to steer clear of troublesome credit card debts.
These four options for SMEs and start-ups make banks look shabby when it comes to small business funding. All of them have unique facilities and features for small business owners. Amicable interest rates, flexible payment options, and pocket-friendly APRs characterize these four business financing avenues. They have helped thousands of businesses over the last couple of months, and millions of companies now rely on these alternative sources of funding for their regular business operations and for covering sudden expenses and scaling up of business processes.
