Most small businesses will face the challenge of raising capital for their day to day operations. We know it’s difficult to convince a bank or traditional lender that your business will be successful. But other “outside the box” options are available for companies who need financing.
Business startups often don’t have much paperwork to prove their viability other the theoretical concept on paper. Therefore, they are considered high-risk establishments whose funding is not an easy thing to come by. For that reason, they are forced to look for other means that will get their idea going.
When the known funding sources are not an option, businesses look for lending options that consider other factors for loan approvals or different assets as collaterrals. For example, services like Desert Lending that uses your vehicle’s equity as collateral for a loan. With this method you can avoid high interest personal loans that increase in cost over time.
Here are some other financing options to consider:
1. Government Grants
Is your business idea based on research and science? Most federal entities will partner with such ideas to help in providing the requisite finances to carry out the project. Small business administration by the government provides grants on business ideas that have a solution that is deemed to benefit a lot of people in society. If the efficacy of your project is felt by the government, then this could be a very reliable source of financing for your business idea.
2. Venture capitalists
Small business can partner with groups or organizations that come in by partly taking ownership of your business in exchange for financing. In simple terms, if they believe in your business idea, you co-own the business with them as they provide you with the required funds to run the business. All you need to do is to negotiate with them and share the ownership percentage based on the valuation given for your company.
Good examples of crowdfunding sources include Indiegogo and Kickstarter whose idea is to offer financial assistance for boosting small business establishments. In this arrangement, businesses are allowed to pool small investments coming from various investors rather than relying on one investment source.
Instead of spending your choices of investment and enhancing the investment risk in the business when it is just starting, crowdfunding will help you raise various seeds to help grow your startup to a point where it is ready for pitching to your investors. We continue to see more and more companies turn to crowdfunding to raise initial capital.
One should always exercise a lot of caution when choosing a crowdfunding platform to choose. Read the fine print of each of the options you got to make a good choice. This is all in the effort of cutting costs and making your financing option viable.
4. Partner financing
How about getting another industry player to fund your project and allow them to access your product? This is still an option for you.
You can get the funding and allow your partner to get distribution rights, part of your staff or whatever you agree. As long as it makes business sense, it is an option worth exploring. This is a somewhat effective way of getting the funding you need and doesn’t include much issues as you will find with other funding sources. As an example, most auto title lenders will turn to a vehicle lender or repair shop to develop lending partnerships.
With partner funding, the partner is normally a big business and could even be similar to what you are doing. It could even be a company that has interests in what you are doing. If they believe in what you are trying to achieve, they won’t hesitate to fund your business if you agree to their offer.
5. Community Development Funding
These operate like government grants but are a little different. First, they are community-based and work at the local level. They are nonprofit organizations funding micro businesses on terms that are reasonable with the sole objective of ensuring that the business grows to realize its mission and vision.
Just last month, a large community organization assisted a title loan company in Southern California that was looking to expand their business. For that reason, it doesn’t have a lot of conditions and will help applicants to access funds once their business idea is thought to be efficacious. Therefore, it is an option worth trying to get your idea going in the market.
Getting capital for small businesses is one of the biggest hurdles that they must overcome to make it in their field. While conventional funding sources such as banks may not be helpful at that time, it is never the end of the road for such ideas.
As we mentioned above, consider an online title loan before you look at a payday loan or cash advance. There are other institutions to try out ranging from the community, from friends, colleagues, partners and ventures among other viable financing options.