Small business funding is one of the primary barriers that many entrepreneurs face. In fact, insufficient funding or a lack of capital is probably the number one threat to a small business’ success. So what can small business owners do when traditional funding efforts fall through? Thankfully, there are a number of non-traditional methods by which small businesses can acquire the short or long term funding they need to succeed.
With this in mind, here are some great examples of alternative funding options for entrepreneurs, small business owners, startups, and everything in between!
Merchant Cash Advances for Small Businesses
Few small business owners are familiar with merchant cash advances. This is a real shame, as merchant cash advances can be used to raise capital quickly and easily for investment opportunities, real estate opportunities and much more. Merchant cash advances might be a good choice for you if the following is true:
Your business does a large percentage of its business through credit card and debit card sales. These types of cash advances are paid back through future sales. Understanding how merchant cash advances are paid back is vitally important before entering into an agreement.
Your business doesn’t qualify for other types of funding. One of the key advantages of merchant cash advances are that they have relatively lax approval standards.
You need a (relatively) small influx of capital quickly. The other huge benefit of merchant cash advances is how quickly businesses can acquire their funding.
Crowdfunding Options for Businesses
It is no secret that crowdfunding has become more and more common for small businesses in recent years. In fact, one of the more difficult decisions when it comes to crowdfunding comes down to deciding on which of the many available crowdfunding sources will best fit your individual needs. For example, some crowdfunding resources like Kickstarter are more appropriate for artistic projects like video games, films, or literary works while other options like Funding Circle are specifically targeted at small businesses.
It is important to understand that all crowdfunding options come with their own unique terms and conditions. Some crowdfunding is down with a standard interest rate while others promise kickbacks while still others require no payback. It is most common for business crowdfunding to skew towards traditional loan rates, but understanding the terms of your agreement is a must!
Competitions and Other Business Media Opportunities
What entrepreneur doesn’t dream of one day standing in front of the panel on the hit show Shark Tank? The show isn’t just a gimmick either. Massively successful companies including Scrub Daddy, Tipsy Elves, Buggy Beds, and Manscaped all received funding through the show. While we would all love for Mark Cuban to buy into our company for $8 million, there are plenty of other non-traditional fundraising options available through competitions and other media opportunities.
The key here is often to find small business contests which suit your organization’s strengths. Starting with local contests and also nationwide small business competitions can’t hurt. The caveat here being that no small business owner should expect to win.
Small Businesses can Utilize Invoice Financing
Another way that small businesses can raise funding is by utilizing invoice financing. Invoice financing essentially uses unpaid invoices as collateral against short term loans. Typical invoice financing advances would be in an amount equal to approximately 75 to 90 percent of unpaid invoices. It is important to understand that these types of agreement may require the invoice payments to go directly to the lender, who will then divvy out the remaining balance to the business.
Invoice financing is most appropriate for small businesses waiting on large invoice payments who need a quick injection of cash. The overall impact of paying for fees and percentages on a short term loan must be weighed against the potential positive of an up front cash loan.
Opening a Business Credit Card for a Line of Credit
While it is not technically fundraising, opening a business credit card does allow small businesses some flexibility to make purchases which they may not be able to immediately afford. As with any line of credit, this can lead to high interest rates and potentially high fees down the line. Business credit cards can also be thought of as security blankets just in case the business cannot cover the cost of certain purchases.
It should also be noted that business credit cards help your small business build its credit score, which can then be levied into more desirable loan terms down the road.
True Merchant Offers Small Business Loans and Merchant Cash Advances
Small business loans and merchant cash advances are great ways to raise business capital with True Merchant. Speak with one of our representatives for a transparent explanation of how our business funding solutions can work for your business. We will walk you through the application process, and even get you set up with a repayment program that works for you. At the end of the day, our job is to serve the needs of our clients. We are proud to offer funding which can help your business grow!