Funding Alternatives for Your Small Business
3 Alternative Funding Methods for Small Businesses
At some point, all businesses require funding. Today’s economy can make it complicated to get what you are looking for, and sometimes the current funding options aren’t exactly what you need.
There are alternative ways to obtain funding for your small business that might help you satisfy your financial needs. Here are some options you might want to explore.
When traditional bank loans are not an option, there are others you can look into that can help you get capital from banks. Small Business Association and small business lending funds are great alternatives to the typical loans you’d get from a bank, specifically designed for entrepreneurs and small businesses. Their terms are more attractive, and the penalties aren’t as severe. That is very helpful, especially when you’re starting your own business and are just beginning to understand your financial needs. Make sure your business plan is robust before applying.
When you start with little to no assets, bootstrapping is a common type of alternative financing. Bootstrapping refers to meeting your financial needs using personal finances or operating revenue. It’s about pulling from wherever you can to sustain your business but is an excellent way to prevent taking out too much funding, too early in the process.
Bootstrapping has the potential to increase financial strain, but it gives you more control. You could consider funding from friends or family, selling assets, using your savings, or opting for lines of credit.
Revenue-based finance is also known as RBF. It is an entrepreneur-friendly type of loan and a good fit for companies looking to grow faster. It involves no fixed payments since a percentage of your monthly revenue determines the amount, which means they fluctuate based on your company’s business cycle. There will be lower payments when the business is slow and higher payments as your independent insurance agency grows. Once the principal amount and a fixed interest amount — previously agreed upon— are paid, the loan will terminate.