Many aspiring entrepreneurs have bright ideas for their business, but for many of them, the lack of capital prevents them from starting. Startups are often turned down by banks when they try to get a loan and even established businesses can face similar hurdles. If you have a newly established business, here are your options for alternative financing:
- Online cash advances for businesses
There are lenders who specialize in offering merchant cash advances to startups and small businesses. The application process is usually very fast and you’ll know if your application has been approved or not in just a few days. One of the benefits of using this option is that the requirements are not as stringent as those needed by the banks, and most of these lenders specifically cater to new businesses.
- Angel investors
You can find angel investors who are willing to invest their money in your business in exchange for a percentage of their investment, usually around 20-25%. Costco, Google and other prominent companies today were helped by angel investors. Aside from being able to give you the capital you need, angel investors are also savvy business people who can provide invaluable advice and share their knowledge to help your company succeed.
- Invoice factoring
With invoice factoring, also known as invoice advance, a lender will give you the money you need in exchange for invoices that you have billed to your clients. You will pay them back the loan with interest once your customers have settled their bill.
Oftentimes, businesses have to wait a month or more before they are paid by their customers. So while waiting for your payment, you are left with little to no money to pay your employees or to even to fund your other projects. An invoice factor closes the gap between your billed work and customer payments so that you can continue running your business without any shortage of cash flow.
There are websites that are made specially to fund small innovative startups. You can visit websites like Indiegogo and Kickstarter where businesses pool small investments to help finance startups. But before you choose this option, make sure you read the fine print, because some of these crowdfunding sites have processing fees or require you to reach your full stated financial goal before you can receive the money pooled by investors.
- Business grants
Depending on the kind of business you want to start, you may be eligible for a grant from the government or even private institutions. Some government agencies and private organizations offer financing to businesses that focus on research or science, while others offer grants to businesses that improve people’s quality of life or provide livelihood to the poor. There are also grants exclusively for female or other minority entrepreneurs.
If you have a brilliant business idea and you’re confident it will take off, consider alternative financing so you can make your dream a reality.