Finance is one of the main reasons why start up businesses don’t make it past the two year mark according to a Sage Foundation research. But, a bank loan is not always available when you need it and you may have to look at other finance options to help your business grow.
Karl Westvig, CEO of Retail Capital (a company
which was established to provide businesses with an alternative funding solution to
traditional small business loans), shares these alternative financing methods:
1. Invoice finance
Invoice finance companies will forward upfront cash to SMEs based on unpaid invoices. They charge a small fee for collecting the debt. This eliminates the waiting period for payment, and gives those SMEs the cash up front.
2. Venture capitalists
In this scenario, wealthy individuals will offer entrepreneurs with potentially rapid-growth ideas a large chunk of their own money in exchange for a share of the business and probably some control over it.
3. Business cash advance
This is a good alternative to traditional bank loans. Cash advance companies will advance you working capital, and repayments are taken from daily credit card turnover. So you are always paying back in line with your income. This option is quick and convenient, with minimal fuss.
4. Borrow from family
This option can become complicated, but can work effectively if planned well. You will need a family member or friend who has the finance you are looking for, and it’s extremely important to get the loan terms in writing.
5. Accelerator programmes
As the name suggests, this option is perfect for start-ups that could do with some mentoring and support to give their idea legs. In most cases, investors, whether financial or knowledge, will ask a share of the business in return.
Peer-to-Peer lending, also known as P2P, is a more recent option, and these lenders are more open to loaning finance to SMEs on a short-term risk assessment. It is less complicated than a bank loan.
7. Crowd funding
Crowd funding is a very new online method of raising finance. This possibility involves many people investing small amounts in your business. There are quite a few crowd funding options on the web, and some may include expertise in addition to straight finance. This is a completely debt-free option, and very popular at the moment.
Whichever route you choose make sure you do your research and find an option that suits your interests and business best.