Money talks loud and clear. Whether a massive new business venture is floating around in your head or you’re thinking of expanding your fresh start up, it would help if you had the capital. Whatever the case may be, you may need financing to put your plans into action. Unfortunately, a standard commercial loan may be unattainable for you at the moment.
However, fret not because there are many other types of loans out there, such as unsecured business loans, angel investors, crowd funding, and the likes to help you reach your goals. Consider the following alternative funding options to help you get started:
Try Securing a Grant
There are several business grants that you can try to apply for to help you defray the cost of starting a new business. Check out both non-profit and state or local government economic grants that help out small businesses. You can also check out federal grants. You need to gather documentation and then apply it. It may seem like a long, arduous process, but if your business qualifies, this grant will give you immeasurable support that can jump-start your business venture.
Borrow from Home Equity
If you’ve paid a handsome sum for your house, you can consider taking out a loan with the value of your home as the collateral. The loan amount is determined by how much you have already paid. It also hinges on the current value of your property based on the assessments of an appraiser of the lending institution. This is an excellent method because the interest rates will be manageable, and you can make the payments over a more extended period to make it a lot easier for you.
The Unsecured Business Loan Option
Check out unsecured business loans offered by alternative finance institutions. This requires no collateral upfront; hence it is called unsecured. The lender is aware that the borrower may default at any time. That being said, you need a good credit score, great financial history, and a healthy cash flow report to be able to avail of this kind of loan. You will be given a shorter loan term and a higher interest as opposed to the usual secure business loan with collateral.
Borrow Money from Family or Close Friends
Who else will help you in your time of need but your family and genuine friends? If you have supportive people in your life who have extra money to spare, then consider yourself lucky that they can afford to help you out. The critical thing to remember when going this route is to put the terms down in black and white to prevent possible issues.
As the one who is asking for a favor, you have to honor your word and pay on time. The considerable caveat about this kind of funding is if you default on the loan, you can end up ruining your relationships. Make sure you can fulfill your obligations if you push on with mixing family or friends and your finances.
Dip into Your Bank Overdraft
The concept of this is simple; you dip on your bank overdraft if you need flexible cash flow during your business’ leaner months. Once your business picks up, you can pay off this loan. Unlike commercial loans that need endless paperwork, this is a pretty straightforward transaction with interest paid only on what you borrowed. You may, however, be charged interest rates that are above the base, and the charge for payment is on demand. This is great when you need to pay for something like ordering additional supplies, buying equipment, or funding an emergency.
Go the Unique Route of Crowd funding
Thanks to the advent of the internet, you can pool sponsors in the many crowd funding sites on the internet. If you have a great product and a heart-rending backstory, this is the right place where you can find financial support for your ideas. Apart from getting supporters who donate to your cause, you inadvertently market your business. Of course, there is no guarantee that people will give to your venture, so you can try this approach, but learn to manage your expectations.
Get Creative with Invoice Financing
If your business is already up and running, but you need capital infusion to grow, you may be able to rely on invoice payments that are due. You can use your invoices to seek an advance from a lending institution. Just pay the administrative fees and interest costs and then get the money. In the same way, you can get a merchant cash advance for where you borrow against your business’ future revenue for a short time frame.
Consider Angel Investors
Those who have a great business concept can search for angel investors to help them out. These angels are established and affluent individuals who give back by providing capital to startups. The exchange for this owns a percentage of your business. What’s great about going this route is you may unwittingly find a mentor to help you out. It never hurts to try and ask.
Bottom Line
There are numerous ways to fund your business other than a standard commercial bank loan. The few items listed above are not exhaustive, but they are good options from where you can start. The most important thing to remember when securing any funding is to read the fine print. The last thing you want is to face unnecessary charges that you may not be able to afford.
