For many small businesses and startups, traditional financing is not an option. However, all businesses need some sort of working capital to stay afloat, so what are small business owners to do? Fortunately, there are dozens of alternative financing options entrepreneurs can turn to for the money they need to grow their businesses. If you’re the owner of a small business or a startup, and if you need funds to make your business dreams a reality, consider these four options:
Microloans are loans are small loans of typically less than $35K that come with low interest rates and reasonable terms. Micro lenders are known to serve those of disadvantaged groups, such as those with bad credit, women-owned businesses and minority-owned businesses, and aim to give small business owners and startups the capital they need to grow.
Small Business Administration loans are US government-backed loans and are a good alternative financing option for those who don’t have much collateral and therefore cannot get a loan directly from a bank. SBA loans are not given by the SBA itself; rather, the SBA guarantees a portion of a loan issued by a bank, credit union or other lender so that if you happen to default on the loan, it will repay the remaining debt.
Crowdfunding is an increasingly popular financing option for entrepreneurs, as most crowdfunding options come with zero interest, zero terms and no repayment. Crowdfunding is a way for businesses to raise funds from other online users via platforms such as Kickstarter and GoFundMe. There are four types of crowdfunding that you can use: rewards, equity, debt and charity, with rewards being the most popular. Bear in mind that most people are not willing to give you their money without a good reason, which is why this alternative financing option does not work for everyone. The most successful users either have a unique sales pitch to compel donators with or are starting a charitable organization.
Online lenders off many of the same products are traditional lenders except their loans are easier to obtain and come with less stringent requirements. They also take less time to apply for, and if approved, you can generally get your funding within a matter of hours. That said, because of how easy they are to obtain, online loans usually come with higher interest rates and stricter repayment terms.
If you need funding but cannot obtain a traditional loan, consider alternative financing. Microloans, SBA loans, crowdfunding and online loans are all options that come with little risk and a lot of reward.