5 Unusual Business Funding Sources to Tap

When your back is against the wall and you find you need some significant cashflow, which you don’t have, for your business to make it in the next 30 days or so, often times conventional funding sources just aren’t an option.

Business funding

When the wolf’s at the door and/or you need money to launch/expand quickly, there’s simply no time to seek out bank loans, commercial mortgages, venture capitalists, angel funding, family loans, etc.

If that’s the position you find your business in currently, you might just want to give one of the following 5 unusual funding sources a shot:

1. Invoice Factoring

Invoice factoring is perhaps the most popular among the unusual methods for financing a business. This method is exclusive to established businesses who have a consistent amount of monthly receivables to leverage for cash.

Businesses sometimes need immediate cashflow that they do not have:

  • Paying outstanding bills of their own.
  • Meeting a seasonal upturn in demand for their product or services.
  • Funding an expansion effort with an immediate deadline.
  • Etc.

Outstanding invoices are sold to a factoring company, who buys the invoices at a discount and for a fee, then takes the money as it comes in, sometimes acting as a collection agent too. If your clients are expected to pay on time, and there’s little to no chance of any product returns or demands for discounts on services rendered, invoice factoring is a reasonably affordable way for businesses to secure immediate funds by leveraging future profits.

They also come at a price and with risks:

  • Initial factoring fees to process the sale of the invoices.
  • Interest paid for the cash advance.
  • Bad debt expenses (ie., what you feel may not get repaid, such as long outstanding invoices).
  • Holdback receivables kept by the factoring company in anticipation of losses such as product returns, disagreements by clients over services rendered, etc.
  • If the factoring company is forced to collect the money because the client hasn’t sent you the payment on time, clients may get angry and take their business elsewhere.

2. Customer Loans

This type of unusual funding source only works for highly established businesses. Not only that, you need to be an established business that has a very close rapport with their customers – ie., Walmart, Target, etc., need not apply! This concept started a few decades ago in the agricultural industry with customer supported agricultural loans (CSAs).

Customers lent farmers money for their spring crop planting, with the promise of a highly discounted price on the final crop in the fall. Now, customer loans have trickled over into the food and service industry and other sectors, where business owners ask customers for loans to do upgrades on their facilities or to buy additional inventory, in exchange for a set amount of goods or services per week/month for a set time until the loan’s paid off.

It’s important to set reasonable expectations for repayment so you don’t end up running out of stock or going broke in the process.

3. Hedge Fund Loans

Hedge fund loans have become a popular funding source for many tech and heavily asset-backed companies. Hedge funds have also been known to give loans to companies operating in sectors that can “benefit” their trading efforts (this is referred to as “insider trading”). Surprise, surprise!

If you have the right concept and a good pitch, hedge fund loans can be much easier to get than any other type, and funding caps can easily go into the millions if your idea sounds highly profitable to the fund’s management.

Businessman holding speech bubble with a word FUNDING

4. Title Loans

Title loans are fast and easy, but they can be expensive if you’re not able to repay the loan tout de suite. Essentially, you sign over the title to your personal car, company cars, motorcycle, or boat (there are other options, but these are the most common collateral sources). You must own whatever you put up free and clear.

In exchange, you can get up to 25% the value of said possession, with repayment interest usually set at 25% per month. In other words, a $2,000 loan would cost you $500 a month in interest – see how this could get expensive if you take a few (or the industry average of 10 months) to pay your title loan back? Interest is compounded on the original loan amount too, not what’s outstanding at each month’s end.

That said, this can offer you short term fix for your business’ financial needs. Florida Title Loans, with 10 years of experience in the business, advises that title loans are best used for unexpected expenses, due to the speedy approval and 24/7 availability.

All in all, you better know what you’re doing before using this as a funding source for your business!

5. Convertible Debt Loans

Convertible debt loans are also for established businesses or those with a proven concept in booming industries. This type of loan is very common in VC and angel circles, but there are also private companies cropping up all over the place that specialize in handing out this type of loan.

In a nutshell, the lender/investor agrees to give your company funds in exchange for the opportunity to either:

  1. Collect on the debt, with interest at a later date.
  2. Convert that debt into shares in the company, if the company does well in the future – usually at the price shares are going for at the time the loan is issued.

Convertible debt loans are a win-win in most cases for the lender, because they can either take their money back if market conditions or poor management cause the company to flop, or they get to reap the rewards of your hard work (and their generous cash infusion) if the company does well by converting the debt into company ownership.

The only upside for the business owner is they get immediate cash that’s easier to obtain than most other methods. The downside is you can end up giving up significant stocks in the company at an egregiously-discounted rate if your stock values soar.


As you can see, the 5 funding methods above are far more costly to obtain than a low-interest bank loan or an investment from a VC, angel or friend/family member. However, if you’re looking for unusual funding sources to get some much needed cashflow for your business, the above list of options are far better than the alternative (ie., running out of money).


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