Funding your Business without a Loan from a Bank

Most of the time, applying for a small business from banks require a collateral; and this has been proven quite a challenge to small business owners. Due to a lot of requirements, most small business owners have already factored out getting loans from banks. Nevertheless, this doesn’t mean that you cannot find other creative ways in funding your business. Here are some things to try, and their pros and cons, in order to get that additional funding for your business.

The Factoring Method

The factoring method allows you to sell your business’ accounts receivable to a third party entity in exchange for immediate cash. Factoring can be quite expensive though. With mark-ups of up to fifteen percent, factoring might work for expansion; but this method might not be best for a company that’s downsizing or losing money.

Use your IRA or 401(k)

You can also consider borrowing money from your retirement funds. First thing you might want to consider in doing this is taking a sixty-day interest-free loan from your 401(k); there are also no fees involved if the loan was paid back on the time specified. One important thing to take note of though is that these funds are for your retirement. It is usually risky and might even be devastating to lose this money in business.

Try to Secure a Government Grant

Government grants require extensive research at the local, state, and federal government levels. One important consideration though is that these grants are very technical in nature. Moreover, they usually require some very strict reporting in the progress of the research being conducted.

Get a P2P (Peer-to-Peer) Loan

You can find some online organizations that offer peer-to-peer loans. These peer-to-peer loan companies have people who you don’t know offer you to loan money from them. Your possible loan amount depends on your credit score, the economy, the period of the loan, and your business’ story. On the other hand, peer-to-peer loans are hard to acquire and the interest is quite high.

Use Global Crowd Funding

Very much like P2P funding, crowdfunding allows you to get people to invest in your particular organization. But unlike, P2P, crowdfunding donors do not expect to receive money back. You can, in turn, provide them with rewards of receiving your products first, or having products named after them.

Engage in Microfinancing

Microfinancing is relatively new. Microfinancing organizations provide small loans that are based on your business’ experience, marketability, and sales.

Get Financing Options from Wholesalers or Suppliers

Doing this method helps you work more closely with your supply chain to get the financing that you need to further fund your business. This method works best with a local supplier who has really shown great interest in your products or services and is willing to work with you. As a side note, always remember not to personally guarantee these types of loans.

Join Business Plan Contests

Another creative way to get your business funded is to win the money through competitions. There are numerous business plan writing competitions that are awarding a good amount of money, or funding, to the winners. Just make sure that your business writing and presentation skills are tip-top because you will be competing with the best in the country.

Find Organizations that are ‘Business Incubators’

New businesses can get money, mentorship, and other similar support from organizations that are business incubators. Business incubators usually have great track records of success on the businesses that they’re nurturing. Just be mindful that there is a lot of competition for small businesses that want to be part of these organizations.

Barter Goods or Services

You can also look at exchanging products or services instead of money. Moreover, bartering can save you money and move some unused resources. This can be done directly with another business or through barter exchange organizations. Do take note though that you only need to barter a few select products and services; bartering without cash cannot pay employees or rent.

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