Trying to fund a new business? Finding alternative sources of raising capital could provide the answer to your prayers.
The modern small business owner does not have to rely on the traditional methods of financing. Traditional methods include going to the bank for a business loan, applying for grants in your field, and reaching out to network with potential investors. Modern methods of raising capital include things like unregulated business lending and peer-2-peer support.
Why Might You Need Alternative Business Lending?
It may be that the bank or building society refuses to allow funding for your business. This might happen if your business plan does not have the correct financial forecasting. It could happen because you are a sole trader, and you do not have a good credit history. It could be that your business idea is too risky for them.
The bank might refuse a loan for any reason, particularly if it thinks it is unlikely to have that loan repaid. They do not lend to people whose small businesses are not as well established as they would like, or to those facing issues with profits or income.
Whatever the reason, turning to alternative finance streams for your business could be a way to unlock capital to carry you through tough times.
Alternative Lending Methods for your Small or Medium Business
If you are denied traditional credit, consider the following instead.
1 – Consider a HELOC
A Home Equity Line of Credit is a new concept here in the UK. Previously, we only saw it in America, Australia, and Canada. This method of financing lets you borrow about 80% of your home’s worth. That way, you can unlock thousands of pounds to spend as you wish. You should only pay interest on what you use, but you have the full amount available to you. This is great for businesses that may need a few months to start turning a profit again.
You can find out more about a HELOC from https://www.selinaadvance.com/. We believe they are the only ones offering HELOC’s so far but watch this space.
2 – Asset Financing
If you are fortunate enough to own an established SME with a fleet, machinery, or other warehousing, factory, or retailing equipment, then you are in luck. You can find funding from financiers who will let you borrow against the value of your assets. This works best for companies like taxi firms or even restaurants, who have multiple thousands of pounds tied up in their equipment.
3 – Invoice Financing
Using the invoice financing method, you borrow money against the outstanding invoices your business has. If you are a construction company that has undertaken a massive job, you might pay for materials to complete it using invoice financing. You do not have the money yet, but when you get paid, so will they. This has minimal risk if you use a trusted client who has always paid on time before.
4 – Raise Venture Capital
For the start ups among us, venture capital and angel investment are the two best forms of alternative financing. You find these types of investors through having tight financial forecasting in your business plan and applying to interested parties within your sector. You will find these by networking. You can find investment bankers and financial institutions that may help with this.
5 – Crowdfunding
It is possible to crowd fund for your start up business, too. If you have a business idea with the potential to make positive changes, then this works best. For example, a tax company wouldn’t get crowdfunding support, but this start up that drags trash out the ocean managed to do not too badly. Crowdfunding allows a community of people to donate money to your business cause.