Only a handful of business people will walk into a bank and get the financing they need. Considering the current declining global economic trend and the recession, getting funding from banks is becoming more difficult by the day. Especially for start-ups and businesses with a low credit score, banks will not heed their financial requests or support them moneywise to ensure their success.
So, what other options do small businesses strapped up for cash have?
This article will look at the various alternative funding options small business owners have when they require financial injections.
Let us dive into details.
Invoice factoring is growing in popularity, and for a good reason. For starters, it is not a debt and will not adversely affect your credit score. Also, you do not have to wait for a week or month for the money. Once an agreement is made, invoice factoring companies hand your business the money in 24 hours, give or take.
Invoice factoring is whereby a business sells its invoices to a factoring company. The factoring company purchases them at a discount and is left asking for the money from the debtor.
There are a myriad of factoring companies that cater to different industries. From staffing to telecom factoring companies, you will rarely miss an invoice factoring company that is ready to get into business with you.
Grants are monetary awards given by the government or states to small businesses. Considering that grants are not loans, they are very competitive and, in most cases, require specific circumstances for a business to qualify.
You could research with your local government or state to better understand the qualifications needed to make winning a grant easier.
- Peer-to-peer lending
Peer-to-peer lending eliminates the need for a middleman when it comes to funding. Here, people in business can borrow money from other entrepreneurs and businesses. Having started less than two decades ago, peer-to-peer lending is now a popular way businesses use to get funding to elevate their business to the next level.
Currently, various groups specialize in peer-to-peer lending. Here, business people can pitch their ideas directly to investors who give them a loan based on their type of business and credibility. It is a preferred method of funding because its interest rates are not as high as those of traditional lenders such as banks.
- Equipment finance
Another popular financing option is known as equipment finance. Here, a lender gives a borrower the finances to purchase a piece of business equipment. The borrower then pays annually, quarterly, or monthly until payment is made. Throughout payment, the lender retains ownership of the equipment and is used as collateral if the borrower fails to pay.
Traditional methods of money lending are complex and have high-interest rates. Additionally, they have high rejection rates, shutting out small business owners who are in dire need of funding. By considering the above-listed funding options, you position yourself strategically to get the money that goes a long way in ensuring company growth.