How your Business Can Raise Capital Without the Bank
Banks have traditionally provided an important source of funding for businesses to fuel growth, purchase equipment, and sometimes even to acquire new property or facilities in which to conduct business. But there are some major drawbacks to applying for bank loans, primarily the fact that they simply cannot react quickly to any funding request which needs to happen immediately in order to take advantage of a business opportunity.
Then too, banks are heavily regulated and must enforce specific guidelines for approval, many of which exclude new businesses or those without much credit history. For these reasons, alternative financing has been making serious inroads into the funding markets, and alternative lenders have become major players on the financial landscape these days.
Raising capital through alternative means
Here are some of the ways that alternative financing can fill in the gaps left by banks which are far less flexible or agile about financing:
• Working capital loans – you can get a working capital loan up to $500,000, but your business must be at least two years old, and generating at least $100,000 of business annually. You’ll also need to have good personal credit in order to be approved.
• Unsecured business loans – to qualify for this alternative financing option, you don’t have to supply collateral, but you do need relatively high sales volume, and a factoring company willing to approve your application
• Merchant cash advance – you can get immediate funding even without good credit, because approvals are based on the monthly value of your credit card sales
• Lines of credit – these can be acquired even without having a great credit score, because real-life data carries more approval weight, and the money can be used for anything
• Online loans – some online companies can secure funding for your business in amounts ranging from a few thousand dollars on up to $1 million
• Microloans – this alternative financing option provides online loans in the range of $500 to $100,000, but they must be secured by collateral and/or equity
• Receivables factoring – a factoring company purchases your accounts receivable at a percentage of their value, in exchange for immediate cash that you can use.