By Monique Dean, Client Marketing Advocate, PalmPons, LLC
Business owners are not limited to traditional loans to fund their business. There are a lot of ways in which they can secure funding through other avenues. Below, we will go over some of the more non-traditional ways that you can secure funding for your business.
Crowd Funding
Pitch your business idea on the web to generate excitement and get people from all over the world eager to contribute to your vision. There are many crowdfunding sites, like GoFundMe and Kickstarter that will give you the opportunity to pitch your idea in order to gain financial assistance from others. To do this, you will have to set a goal, pitch your idea or business and explain why you need the amount you are asking for. If you fail to reach your goal, the site will not release the money you raised and it will be returned to the investors. If you exceed your goal, you will be able to use that to further fund your company. Usually, companies will offer incentives or prizes to those who invest in order to help them reach their goal.
Personal Credit
With generous payment terms, you can use your personal credit line or credit cards to push some of your expenses further down the road. If you are smart about it, you can make your small and everyday purchases using credit. This will free up the money that you would otherwise use for those purchases to instead spend on your company.
Home Equity Loans
If you own a home, you have the option to liquidate some of the equity that you have and use it to finance your company. Although this option is only reserved for those that own a home and have equity to draw from, it is usually easy to obtain and the interest rates will typically be more favorable than through other avenues.
Peer-to-Peer Lending
Not to be confused with crowd funding, peer-to-peer lending is where people come together to lend money to each other. Lending Club and Prosper are two big names in this industry, where they connect everyday investors to borrowers without the banks. Since they are both online marketplaces, they can offer lower interest rates to borrowers and attractive returns to investors. With a simple qualification process, you receive offers within minutes and can evaluate loan options with no impact to your credit score.
Invoice Financing
Also known as “Accounts receivable financing” or “factoring,” invoice financing is an alternative financial solution that can turn your unpaid invoices into cash. Companies like BlueVine and Paragon Financial can supply cash on your business sales immediately, rather than waiting for 30, 60, or 90 days+ for customer payment. Whereas traditional bank loans determine how much money an individual qualifies for based solely on the borrower’s creditworthiness, an invoice company will research the credit history of the seller’s customers prior to purchasing the invoices. With faster funding and a higher approval rate, this option allows you to capitalize on more business opportunities or pay employees.
Angel Investors
This is a less creative option, but still worth considering once your business is ready to scale. An angel investor is someone that will agree to provide capital for your company as it needs it. In exchange, you give the angel investor some equity in the company. This can become a mutually beneficial partnership. The investor has an incentive to continue to invest in your company in order to help it grow and increase the value of their original investment. On the company’s side, you won’t have the hassle of seeking out different investors every time you need more funding.
We’d love to hear what you think! Have you used any of these non-conventional avenues to raise money for your business? Or have you used a different channel that is not discussed here? Is there a certain option you prefer for your business growth?
Business owners are not limited to traditional loans to fund their business. There are a lot of ways in which they can secure funding through other avenues. Below, we will go over some of the more non-traditional ways that you can secure funding for your business.
Crowd Funding
Pitch your business idea on the web to generate excitement and get people from all over the world eager to contribute to your vision. There are many crowdfunding sites, like GoFundMe and Kickstarter that will give you the opportunity to pitch your idea in order to gain financial assistance from others. To do this, you will have to set a goal, pitch your idea or business and explain why you need the amount you are asking for. If you fail to reach your goal, the site will not release the money you raised and it will be returned to the investors. If you exceed your goal, you will be able to use that to further fund your company. Usually, companies will offer incentives or prizes to those who invest in order to help them reach their goal.
Personal Credit
With generous payment terms, you can use your personal credit line or credit cards to push some of your expenses further down the road. If you are smart about it, you can make your small and everyday purchases using credit. This will free up the money that you would otherwise use for those purchases to instead spend on your company.
Home Equity Loans
If you own a home, you have the option to liquidate some of the equity that you have and use it to finance your company. Although this option is only reserved for those that own a home and have equity to draw from, it is usually easy to obtain and the interest rates will typically be more favorable than through other avenues.
Peer-to-Peer Lending
Not to be confused with crowd funding, peer-to-peer lending is where people come together to lend money to each other. Lending Club and Prosper are two big names in this industry, where they connect everyday investors to borrowers without the banks. Since they are both online marketplaces, they can offer lower interest rates to borrowers and attractive returns to investors. With a simple qualification process, you receive offers within minutes and can evaluate loan options with no impact to your credit score.
Invoice Financing
Also known as “Accounts receivable financing” or “factoring,” invoice financing is an alternative financial solution that can turn your unpaid invoices into cash. Companies like BlueVine and Paragon Financial can supply cash on your business sales immediately, rather than waiting for 30, 60, or 90 days+ for customer payment. Whereas traditional bank loans determine how much money an individual qualifies for based solely on the borrower’s creditworthiness, an invoice company will research the credit history of the seller’s customers prior to purchasing the invoices. With faster funding and a higher approval rate, this option allows you to capitalize on more business opportunities or pay employees.
Angel Investors
This is a less creative option, but still worth considering once your business is ready to scale. An angel investor is someone that will agree to provide capital for your company as it needs it. In exchange, you give the angel investor some equity in the company. This can become a mutually beneficial partnership. The investor has an incentive to continue to invest in your company in order to help it grow and increase the value of their original investment. On the company’s side, you won’t have the hassle of seeking out different investors every time you need more funding.
We’d love to hear what you think! Have you used any of these non-conventional avenues to raise money for your business? Or have you used a different channel that is not discussed here? Is there a certain option you prefer for your business growth?
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