Whether you are new in business or you have some experience in running your small business, you will need numerous strategies that you can use to grow your venture further.
There will come a time when you will need fast and immediate funding alternatives for stocking your business. Sometimes, banks are reluctant in providing loans to small and growing businesses. When a business owner does not meet the criteria of the bank for a loan, you can find yourself opting to sell your home assets or acquiring a loan against your home or office. Those kinds of loans can help; however, there are other alternatives one can use without putting your property in risk. The following are some alternative options that one can use for your business needs;
1. Lending Based on the Assets
This type of lending is where you use the assets you intend to buy as the security for the amount of loan you intend to borrow. The goods remain as properties for the financing company until the last minute when you can pay the full amount. There are two alternatives for this purchase. These methods include hire-purchase or lease purchase alternatives. On a hire-purchase method, the assets get included on your balance sheet while for the lease purchase, the assets do not get included on your balance sheet until the last minute when you pay the loan in full together with the purchase fee.
2. Factoring Lines of Credit
This type of financing allows the business to pay off short-term costs, like buying of equipment, paying the operating cost, expanding inventory, and many others. Lines of credit work the same way with credit cards. This way, you get allowed the access of a certain amount of cash that you can utilize as you intend. The financing company makes frequent payments so that you can withdraw as much money for various expenses. The company will attach an interest on each withdrawal you make. The interest rates for the line of credit are above the prime lending rates and lower than the credit card rating.
3. Invoice Financing
There are other methods of financing you can rely on such as invoice finance. This type of financing helps companies dealing with B2B products or services. In this instant, the clients or customers receive an invoice and the invoice copies produced to the lender. Upon receiving the invoice copies, the lender presents some percentage of the invoice amount to the company. When the client or customer pays off the full amount of credit, the lender pays the rest of the invoice amount to the company after taking the applicable fee.
4. Looking for a Merchant Cash Advance
A merchant cash advance becomes a secured financing method after the lender inspects and verifies the company’s constant and positive cash flow. The financing can also get secured by the future credit card transactions. The method is safe for small businesses loans and other traditional financing methods. The financing can work for the small businesses that cannot secure a bank loan due to lack of credit ratings and security.
5. Looking for Purchase Order and Trading Finance
For the owners of small businesses, sales or production process is not a challenge. The most challenging issue is finding a reliable financing method to help purchase raw material. When the wholesaler, distributor, or producer decides to go for the purchase order financing, you reduce the chances of increasing your bank debts or selling your assets. This method of financing is a fast and flexible alternative. The method helps companies deliver great orders and make a significant profit. The option can help you make timely delivery and raise your market share.
6. You can also Opt for a Turnaround Financing
The small businesses that are struggling financially but making positive development can look up to financing companies to turnaround. How does a turnaround financing work is that the company accepts that there is a problem and allows changes in the management? Then, the company employs advanced strategies that can work. The turnaround method works appropriately for companies with a reliable business model and good records of profitability and steady revenue. The method works properly when the company has short-term financial problems or suffering from credit restrictions. Some of the issues the method can solve effectively immediately include losing a principal client, a decrease in stock price, delay of payments or salary, and layoffs.
A business that depends only on the bank loans for development can drag behind, especially if you do not satisfy the standards and criteria for loan approval. Therefore, you can opt for alternative funding solutions. The options have flexible terms and affordable credit requirements that get directed on your favour. The alternative financing companies work with companies struggling to make it in business. Therefore, you have to prove to have an average positive performance.