Not Qualified for Traditional Bank Funding? What Small Business Financing Options do You Have?

As a small business owner meeting your funding needs is an important consideration. If you don’t qualify for traditional bank funding, is it the end of the road? Not really, there are a number of options available to help you meet your funding needs.

You can consider commercial finance options offered by most banks. When bank financing is not in your playbook, you can also consider alternative financing, such as crowdfunding.

commercial finance
photo credit: Nic McPhee

To help you consider your options, here is a glimpse at them…

Invoice Factoring

You need liquidity to grow your business. The good news is, you can stay liquid with Invoice Factoring. Typically a part of commercial finance program offered by a bank, it is a form of secured funding that provides businesses immediate cash through the sale of their accounts receivable. This form of financing (also known as accounts receivable factoring) is a mean of obtaining capital, since the costs of factoring are directly related to the business cycle.

Invoice Discounting

Invoice discounting is a form of short-term borrowing as an option to access commercial finance can be used to improve your company’s working capital and cash flow position. Invoice discounting is facility through which a business can draw money against its sales invoices before the customer has actually paid. Implementation is by borrowing a percentage of the value of a business’s sales ledger from a finance company, effectively using the unpaid sales invoices as collateral for the borrowing.

Although similar to invoice factoring, there is one big difference: Invoice discounting gives you cash in advance, whereas factoring gives you long term cashflow injection.

Crowd funding

If you are looking for non-traditional financing options, then the crowd funding route is now available to help you realize your entrepreneurial dream. Post a project on a crowd funding site like Kickstarter, define your financing goal and describe your project in the best possible manner. Likeminded people who identify with your idea and vision will come on board and help you reach your goal.

Selling Your Products

A pre-sale of your products is one of the safest and best ways to raise finance. That way you don’t depend on anyone else your needs and also get to test the market response to your product. If you find takers then your financial needs are met with ease and better still you get orders even before your products launches. Isn’t that great?

Angel Investors

Angel investors have been responsible for helping to start up several prominent companies such as Google and Yahoo. This alternative form of investing is something that happens in a company’s early stages of growth. Usually investors expect a 20 to 25 percent return on their investment but the perks that come along with angel investors are relaxed working atmosphere, freedom to work and take quick decisions.

Venture Capitalists

If you own a small business that is beyond the startup phase and already have revenues coming in then a venture-capital investment may be an appropriate source of financing.

For a fast-growth company with an exit strategy already in place, venture capitalists present a good investment source that can also be used to network and grow their company quickly with professional management.

Winning a Contest

Participation in a contest for new business ideas or innovators is a good way to earn some huge prize money to invest in your business. It is a two pronged strategy, one that lets you get your business in the public eye and helps you meet your financial goals.

To wrap this up if you don’t meet the bar when it comes to traditional bank financing, don’t despair. You have many alternatives to meet your needs.