While banks remain the most popular source of financing for small businesses, there are a number of alternative financing options available. The following is a list of some common alternative financing options for small business owners:
1. Small Business Administration (SBA) Loans
The SBA offers a variety of loan programs designed to meet the needs of small businesses. SBA loans are made by participating lenders, such as banks, and are guaranteed by the SBA up to a certain percentage. This guarantee makes it easier for lenders to approve financing for small businesses that might not otherwise qualify.
2. Business Credit Cards
Business credit cards can be a great way to finance short-term expenses or to establish a line of credit for your business. Many business credit cards offer rewards, such as cash back or points that can be redeemed for travel.
3. Merchant Cash Advances
A merchant cash advance is a type of funding where a lender provides you with an advance based on your future sales. The repayment for a merchant cash advance is typically a percentage of your daily credit card sales.
4. Equipment Financing
If you need to purchase equipment for your business, you may be able to finance it through an equipment loan or lease. Equipment financing can be a great option if you don’t have the cash on hand to purchase the equipment outright.
5. Invoice Financing
Invoice financing, also known as accounts receivable financing, is a type of funding where you sell your outstanding invoices to a lender in exchange for cash. The lender will then collect payments from your customers on your behalf.
Crowdfunding is a way of raising capital by seeking small contributions from a large number of people. Crowdfunding platforms, such as Kickstarter and Indiegogo, allow you to post a project or venture on their website and solicit donations from the general public.
Microloans are small loans, typically under $35,000, that are designed to meet the financing needs of small businesses. Microloans are typically made by community-based lenders, such as credit unions or non-profit organizations.
8. Personal Loans
If you have good personal credit, you may be able to obtain a loan from a traditional lender, such as a bank or credit union. However, you may also be able to obtain a loan from an online lender. Online lenders typically have lower credit requirements than traditional lenders.
9. Retirement Plans
If you have a retirement plan, such as a 401(k) or IRA, you may be able to borrow against it to fund your business. However, there are some restrictions on how much you can borrow and when you will need to repay the loan.
10. Venture Capital
Venture capital is a type of private equity funding that is typically provided by investment firms or funds. Venture capital is typically used to finance high-growth businesses with a lot of potential. However, it can be difficult to obtain venture capital funding.There are a number of alternative financing options available for small business owners. The best option for your business will depend on a number of factors, such as your credit history, the amount of money you need to borrow, and your business’s growth potential. Be sure to research all of your options before deciding which one is right for you.