Almost all small businesses sometimes require outside financing to stabilize cash flow during lean periods or help boost further growth. Because loans from traditional banks have stringent requirements and approve only a minuscule percentage of applicants, small business owners often look elsewhere to secure the funding they need. Here is some information on various forms of alternative financing that may be the answer for your company.
Online Loans and Lines of Credit
The products that online lenders provide are similar to those of conventional banks, but you can obtain them easier and quicker, even if your business is new and you have not yet had time to build up a solid credit score. Business loans are dispersals of lump sums, while lines of credit offer you amounts of money that you can draw on in times of need.
Personal and Peer to Peer Loans
If your company is too new to qualify for a business loan, you may be able to acquire a personal loan for business purposes, especially if you only need a limited amount of funds. Another option is a peer to peer loan. Although these loans are approved through online banking platforms, the funds come from private individuals interested in investing in your company.
Strictly speaking, the U.S. Small Business Administration doesn’t issue loans. Instead, it offers guarantees for portions of loans from traditional lenders. Its most popular product is the SBA 7(a) loan, but the SBA also offers microloans of $35,000 or less to new businesses. Other alternative lenders also issue microloans.
In invoice factoring, also known as accounts receivable financing, you sell your unpaid invoices to a factoring company in exchange for the working capital you need. This works well for seasonal businesses and businesses with slow-paying clients.
Other Forms of Alternative Financing
Crowdfunding is a fairly new form of alternative financing in which you solicit funds from private investors on special online platforms. Equipment financing involves loans or leases especially set up for the purchase of machinery, computer systems, and other equipment you need for your business. You can also look into possibilities of applying for local, state, and federal business grants.
For more advice on alternative financing for businesses, contact 5 Star Funding Group.