Secure Business Financing Without a Traditional Loan
The classic “FFF" rule for business financing is well known – after all, friends, family, and fools can be reliable sources of funding. However, many entrepreneurs fail to think outside of the box when it comes to acquiring the capital they need to get their venture off the ground. The next time you need to garner up some more financial support for your business, give these alternative financing methods a try.
Crowdfunding's most well-known platform is likely Kickstarter, but that's hardly a business owner's only option. New crowdfunding websites seem to be popping up regularly, giving entrepreneurs more options than ever.
With crowdfunding, you're able to raise small amounts of money from a large pool of people. Entice people to contribute by offering something in return, like a sneak peek of your product, one-on-one mentoring, a signed copy of your product, or any number of other options. Raising capital through a collective effort like this has helped many business owners get their ventures off the ground. If you're particularly skilled at creating excitement around a new product or service, and are confident in your abilities to get the word out online, this could be a great way for you to finance your business endeavors.
Also known as peer-to-peer lending, crowdlending has grown in popularity in recent years. Websites like Prosper match entrepreneurs with an interested investor, and The Lending Club can give you access to multiple investors. Your credit score, the loan's terms, and other factors will determine your interest rate.
These loans are good options for small business owners who may have been turned down by traditional financial institutions.
3. SBA Loans
SBA (Small Business Administration) loans are one go-to loan option that every small business owner should consider. The SBA doesn't actually make the loan, but it does guarantee loans that are granted to businesses, both through commercial lenders and private institutions.
To learn more about SBA loans and how to secure one, read our guide on how to get an SBA loan.
4. Industry or Other Specialized Loans
You aren't limited to one-size-fits-all loans from large banks or other financial institutions. In fact, many industries have industry-specific loans available. These can be backed by the government, suppliers, or other entities, and are excellent ways to secure funding, often with favorable terms. Farmers, tourism, healthcare… the options are abundant, you just have to do some digging to locate the opportunities.
But, specialized loans aren't only limited to industry. There are even niche loans for women, minorities, veterans, and more. For more information, check out this helpful list of business financing ideas, which includes specific examples of these specialized loan options.
5. Credit Cards
Playing the credit card game can be deadly for your finances, but if you're strategic and smart about it, you can unlock many benefits.
According to one bank's Senior Vice President, putting purchases on a business credit card with low minimum payments (and always making at least the minimum payment) can be a good way to help get a business humming along. But, be aware of the potential downfalls to this financing method. Interest rates can cause your balance to balloon, and carrying extreme amounts of debt can be very damaging to a business.
6. Product pre-sales
If your business is cash-strapped, consider pre-selling your products. You can even offer discounts to entice more customers to place an order. Once money starts coming in you'll have to carefully work with your suppliers to fulfill orders on time, so track the numbers carefully. If you're concerned about receiving too many orders you can offer a limited number of the product, and then accept backorders once that target is reached.
As a bonus, pre-sales can help you attract more traffic to your website and cultivate a raving social media following. If you'd like to create some hype around your business while bringing in more money, pre-sales are an excellent choice.
Do you have any other lesser-known methods for financing a business? Share them in the comments!