Finance Alternatives Obtaining financing for a small business is difficult, especially if you’re trying to get a loan through a large bank. Big banks approve less than 30 percent of the small business loan applications they receive, while small banks approve less than 50 percent.
As such, alternatives to traditional bank loans for business purposes are in high demand. Alternative lenders and alternative financing solutions make up nearly 60 percent of all small business loans approved, so we’re going to discuss them here.
If you’re looking for business financing options that don’t include the traditional bank loan, read on.
- Trade Finance Alternatives
If you’re in the international import/export business, trade finance alternatives can help facilitate the interaction between the two parties and reduce the risk for both.
In many import/export transactions, trust can be a big issue. The exporter doesn’t want to ship the goods until the importer pays, but the importer doesn’t want to pay until the exporter ships the goods. This scenario is common, but through third-party trade finance, the risk factor is taken out of the equation for both parties.
- Business Credit Cards
If you have good to excellent credit, you may want to get a business credit card. Not only is a credit card a great way to pay for business expenses, but it’s also handy to have in emergencies.
When looking for the right credit card for your business, choose one that gives the highest rewards for the types of purchases your business makes. For example, if you plan to use it to pay for travel, make sure you choose a card that gives you cash-back or miles for your purchases.
Crowdfunding allows you to have “backers” who agree to fund your project or business venture for something in return. There are different types of crowdfunding such as charitable, reward, and equitable crowdfunding.
GoFundMe is a charitable crowdfunding platform that enables people to donate to charitable causes. Kickstarter, on the other hand, is designed for business ventures. The Internet is full of crowdfunding platforms, so do your research to find the one that suits your needs and budget best.
- Invoice Factoring
If your company deals with a lot of unpaid invoices or many of your customers tend to pay late, causing you a constant cash flow problem, invoice factoring may be the solution you need to get back in the black.
A factoring company buys your unpaid invoices for up to 90 percent of the amount of the unpaid invoices. The factoring company then collects on the invoices, keeping their fee and returning any remaining money to you. Although the factoring fee can be rather high (as much as 5 percent), invoice factoring is a good option for new businesses with a need for immediate cash flow and frequent late-paying customers.
- Small Business Grants
Small business grants – A.K.A. free money – are understandably hard to get. That said, if you think you might be eligible, you should jump through the hoops necessary to get them. Many business grants are government-funded at the local, state, or federal level. Some privately-owned businesses also offer grants, so it pays to do your research.
Examples of some popular business grants available include a $15,000 grant for veteran business owners from StreetShares, who by the way, also offer business grants for women. Techy business owners should check into the $1.5 million in grant money available from the federal Small Business Innovation Research program. Are you looking for vat registration dubai then read more how to apply for VAT registration in UAE.
Try any of the above options for financing that don’t include traditional bank loans.