Can Your Small Business Benefit From Alternative Financing?
The answer to the titled question is most likely yes, your small business can benefit from alternative financing. In fact, unique ways to fund a small business have become more popular over the last decade because banks have stepped away from small business loans. They have no interest in taking a risk or financing anything less than large amounts that will generate tremendous interest for them, which is why many smaller entities have sought other funding avenues.
Alternate funding is anything other than traditional bank loans, and includes such vehicles as angel investing, bootstrapping, crowdfunding, merchant cash advances, microloans, and purchase order financing among other options. Many smaller businesses find a need for additional cash for both good and bad reasons, and the alternative lending options often come to their rescue.
Good Financing Reasons
Positive reasons why businesses seek out alternative financing including securing additional inventory or raw materials at discounted prices when they don’t have the cash flow on hand to take advantage of the deal. Some businesses may also purchase new equipment or seasonal merchandise. It might be time to buy out a partner or acquire a competitor, or you might be ready to expand.
Not-so-Good Financing Reasons
Businesses hit financial trouble, too, and smaller ones can’t always navigate through the rough waters. Perhaps you operate in an area that sees inclement weather and, unfortunately, the last storm left you closed for days. Maybe the economy has affected your profits, or you might have an unexpected equipment breakdown or other issue that must be addressed immediately.
These are instances where an alternate method of financing can come to a small business’ rescue. Unlike corporate conglomerates, the unexpected can shutter a business’ windows for good, and you’ve invested too much in your dream to allow that to happen. Depending on what you do, you may be able to secure the funding you need to remain in operation without facing a big bank rejection.
Alternative financing works well for many businesses in many instances, so it behooves you to keep it in mind. Research the different methods to determine which one works best for you, because in most cases, the funding must be returned. If you run a successful crowdfunding campaign or opt for purchase order financing, you won’t need to pay the money back, but in the case of the PO funding, you will lose incoming cash. Therefore, make certain your alternate vehicle is in your business’ best interest.