Alternative Lending for Small Businesses: Know Your Options

Financial crisis is inevitable. Whether you’re a business tycoon or an ordinary individual starting up, you must at one time need financial support.

However, there is a difference in how small businesses can get financial assistance and the options available to established businesses.

While traditional sources of income dictate that lending from a bank should be given top priority in case of financial need. It is not worth it at times. Banks and small businesses may not work because of the criteria set.

The financial statements of small businesses may not be similar to those of already established ones. Remember, the bank can easily support established businesses.

After realizing that the banks’ acquisition of funds may not be possible for your small business, you need to seek alternative loans. Read on for a better understanding.

Best Funding Alternatives

Below are the alternative loans and funding you can consider if your business finds itself in a financial crisis and are not able to secure a loan from the bank.

Grants

The government often comes out to help business start-ups and those willing to start a business with funds. However, you have to apply. This financial assistance is known as a grant.

Grants tend to be highly competitive due to the high number of applicants. However, it remains a better option because the government gives it without expecting you to make any returns.

Merchant Cash Advances

If your company has a low credit rating or lacks one altogether, it won’t affect your ability to receive a merchant cash advance. MCAs allows you to acquire both present and future funding.

The lender only has to assess the business status and cash flow in the business. After which, your company can successfully secure funds. You can understand that it’s an amazing financial alternative compared to traditional lending by banks.

Crowdfunding

Crowdfunding is another good funding option, especially if you are looking forward to launching a product. It basically allows for product testing. The funding may, however, vary with the sites you choose to use.

Some sites may only agree to fund the business for a shorter period. Others may only wish to do so after certain criteria are met. But either way, it can be a good alternative source of finance for your business.

Turnaround Finance

This is most suitable if your business is already established but struggling financially. You may decide to seek financial assistance from equity finance companies to turn around your business.

However, you must reconsider changing your managerial structure and change the business model for that to happen. That way, you can convince the equity firm to turn around your business. Few people are aware of this strategy for financing your business.

Venture Capital

Do you know that there are companies out there that are willing to invest in your business? It’s possible. However, you need to lay down better strategies that can see your business succeed.

You must ensure your business has a strong financial policy that will attract investors. Every investor values their return on investment. So, be sure that a venture capitalist will be looking to see results from their investment.

Why You Should Consider Alternative Funding Options

You can consider the above lending options rather than seeing your business die because you only believe in the banks once you are in business. You must be prepared to accommodate changes. There are many options out there other than banks.

Therefore, you must be ready to opt for other available financial options that can bail you out when you’re in need, especially if you are running a small business.

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