Alternative financing options can help you grow your business
How do small businesses get the financial help they need to start or expand their operations when traditional banking institutions just won't do business with them the way they used to? In this challenging economic scenario, small business owners need to think outside the box and be a little more creative in sourcing the funds they need. Thankfully, however, a number of alternative financing solutions have emerged to help them solve their money problems. Here are some of them.
Creative Financing Solutions for Small Businesses
Merchant Cash Advances (MCA)
If you find yourself in need of cash to keep your business going but can't secure a loan from your bank, you may want to consider applying for a merchant cash advance. Under this option, the lender will collect a certain percentage of your company's credit card sales on a daily basis. As such, your payments will be dependent on your actual sales. The fact that there is no collateral and no actual due date for the cash advance makes this option a lot more attractive. While merchant cash advances may entail high premiums (usually pegged at 20% or higher), they can definitely keep your business afloat during these trying times.
As of October 2012, there have been at least 20 crowdfunding platforms that specialize in extending loans to various startup business operations. Under this option, crowdfunding sites such as WeFunder, StartUp Addict, RocketHub and Quirky, to name a few, connect to a community of investors and raise funds through donations, philanthropy and sponsorship.
Under this option, you simply go to a peer-to-peer lending site such as Prosper or Lending Club, set up an account, read the guidelines and post the amount of loan you need. It is really that simple. Peer-to-peer loans are considerably cheaper than a bank loan – and that's another good reason why you should consider it.
Online Pawn Shops
Have you ever considered going to an online pawn shop to help you finance your startup business costs? Well, considering that traditional banks are imposing stricter rules in lending money to startups and small businesses, this option has been attracting more favorable attention as of late. Online pawn shops have been providing funds to small business owners in exchange for suitable collateral and monthly service fees (typically around 3%).
Traditional banking institutions are not the only solution to your financial business needs. There are a lot of alternative financing options that you can use to raise funds for your business. Make sure you keep that in mind.