Financing is the fuel to a company’s machine. It keeps the cogs running. There will be a time, though, when you’ll need additional funds for your business. It could be for expansion or growth. It could also be for paying debts or buying new equipment.
Whatever the reason, problems can arise when seeking additional business funds. It’s a problem if you have a low credit score. Traditional lenders rely on your credit score to determine your trustworthiness. You will also find it difficult to get a business loan if you don’t have collateral to offer.
Fortunately, there is a way to get cash for your business. Alternative lenders come in different shapes and sizes. You can choose from an array to which your needs can be met. Here is a quick overview of the different and most common alternative lending options you can try for your business.
Crowdfunding is one of the best alternative funding options to consider. According to Statista, $73.93 billion funds garnered through crowdfunding in the US and Canada in 2020 alone.
Crowdfunding involves raising funds from several people. It is done through crowdfunding websites such as KickStarter, GoFundMe, CrowdFunder, Indiegogo, and Fundly.
Typically, crowdfunding allows people to raise funds for their startup business. It can also be used, however, to fund any business that needs money. It works by promoting your crowdfunding campaign to people. Those who see your profile and become interested in what you’re business is doing can donate.
Often, those who donate exchange their money for your products or services. It’s a great option if you’re starting a business. You want to promote your company’s goods. It’s also a good basis if you want to grow an online community of supporters. It’s an excellent way of fostering engagement with your prospective clients.
Other fund providers, meanwhile, ask for discounts or perks. Some want profit share or equity in your company. Get help from a lawyer first before venturing into equity crowdfunding. Federal and state laws have guidelines for selling interest or stock in your business in exchange for cash.
If you want to start a crowdfunding campaign now, it’s fairly easy. Sign-up with any crowdfunding site and set up your profile. Describe your business and how much you need to raise. If you want to convince many people to donate, provide a compelling background story of your business and goods.
People who invest in companies that are just starting or are already in their early stages, provided these businesses allow equity ownership interest, are called angel investors. They can invest as low as $25,000 but can provide more than $100,000 if your company has something they care about.
Angel investors want businesses that are passionate and committed to their cause. They look at the integrity of the founders and the quality of their work. If your business plan shows big potential, especially if it’s technology-based, you might get funding from them. Today’s well-known apps have an angel investor to back them up, including Facebook, WhatsApp, and Uber.
If you want to find an angel investor, they are often lawyers, accountants, investment bankers, and venture capitalists. You can also check crowdfunding and angel investor sites. Entrepreneurs themselves are sometimes angel investors, too. They are some of the best angel investors you can ask for funding simply because they have the knowledge and background of running a business.
Everything you own that has monetary value is all considered personal assets. Your car, home, jewelry, and even your valuable collectibles are all your personal assets. As a whole, they determine your financial worth.
According to Inc. magazine, real estate property falls at number one as the most important personal asset an individual could own. To take advantage of the value that comes with your house, you can sell it, and you’ll have additional funds for your business.
Another option is to get mortgage loans. A perfect example is home equity. It is a revolving source of credit that automatically makes your house collateral. You’ll get an amount that is typically equivalent to your house.
You can also get the help of a business partner, whether an individual or a company aligned with your business. If you are in the same sector, it would be easier to explain why you need additional funding.
Partner financing is a strategic move. You’ll ask for funding, and in exchange, your partner can have access to your business. This may seem one-sided, but at a closer look, it’s a win-win situation. You can also get access to your partner’s customer base and even their marketing and sales strategies.
Alternative lending can also be available through venture capitalists, community development finance institutions, grants, and marketplace or peer-to-peer lenders. You can also try other invoice factoring or financing, merchant cash advances, and convertible debt.