For most small businesses, coming up with your innovative business idea is only half the battle – the real work comes when figuring out how to finance your dream. With the advent of the internet, this hurdle is becoming easier for entrepreneurs to jump, which can lead to unforeseen consequences. Along with more options and consequences comes more responsibility to research which will be best for you and your business. Banks will lend you money, but only when you don't need it. So what about when you do need money? Below are options to explore that will get you the funding you need when you need it.
Small Business Lending
You’re a resourceful, upbeat entrepreneur, so you turn to a small business lending company (SBLC). SBLCs are “authorized by the U.S. Small Business Administration to provide loans and other debt instruments to small business concerns.” These companies exist specifically for businesses that are having trouble obtaining capital. Though SBLCs charge more for access to capital, they make the process easier for businesses that just need a place to start.
SBLCs are also beneficial to startups because they are able to offer more flexible loan terms than banks. Sounding good so far? Well, consider that while SBLCs allow businesses to get the funds they need to start production, it is at a high price. To offset the risk of lending money to new businesses, SBLCs tend to charge a much higher interest rate than traditional banks. In addition, they are unregulated by the government, which means that if you don’t like how they do business, well, that’s just too bad.
Crowdfunding
Suppose you want to drift even further from the big bad banks and go directly to the people – in that case, crowdfunding may be your niche. Crowdfunding, or crowdsourcing, involves raising money from a large group of people for a specific project (think Kickstarter and GoFundMe). It’s similar to P2PL, except that crowdfunding is primarily used for projects, not loans, and instead of an interest-based return, those who contribute will often receive whatever product is the result of the campaign. While crowdfunding can be an effective way to raise money, it does lack the same prestige as receiving a more traditional loan.
Alternative Financing
You may want to think about peer-to-peer lending (or P2PL for short). P2P lenders (such as Lending Club, OnDeck or Funding Circle) eschew traditional forms of lending, and offer individuals and small businesses a way to connect with investors who are willing to directly fund their project or business. P2PL is very attractive to businesses that are struggling to access capital elsewhere. Peer-to-peer lending is much quicker than traditional forms of loan applications and one has a much higher chance of receiving a loan. The downside is that interest rates may be higher depending on your existing credit, and, since this is the Internet, you cannot be absolutely sure that the investor (or, vice versa, the lender) will follow through with his/her promised payment. Nevertheless, P2PL is a growing resource that provides more options for businesses – sometimes gleefully at the expense of the traditional credit lenders.
Another great alternative option to explore in your research is the BizX dollar. This community of businesses buy and sell without spending any cash to get the things that they need. The BizX dollar is tied to the US Dollar and generated by goods and services sold, so the liquidity goes up with each new member that joins the network. It has industry-grade security and is legal, approved and regulated by the IRS. Connecting with businesses is also both quick and easy using the online marketplace to find what you need when you need it.
So there you have it. Financing your business doesn’t have to be intimidating – but you do need to do your research.
Another great way to generate extra money for your business is to identify and monetize your excess capacity.
