subject: Alternative Business Financing: When You Cant Get A Business Loan [print this page] Businesses are still struggling to access capital. Traditional lending sources like banks and private lenders just are not making business loans to struggling or growing companies, regardless of their potential.
In fact, the old adage is more evident then ever; you are only qualified for a business loan when you dont actually need one!
So, it is time again to revisit alternative financing strategies for business owners needing money. Whether your business needs capital to grow, meet payroll, or to just simply survive, there are numerous alternatives for your company when banks and other lenders so NO.
1) Leverage Your Business Relationships:
You have worked hard to this point and from all that hard work, you have built strong relationships within your industry; specifically with your suppliers and vendors.
Now, these partners of yours want to keep you as customers just like you want to keep all your customers. Thus, many of these organizations, realizing that your ability to access capital and further purchase their goods and services is being hindered and this hindrance is hurting their business as well.
So, many have created financing arms within their own companies.
Some offer trade credit where your firm is allowed time to pay for the goods and materials it needs. Example, your business purchases $100,000 worth of materials but does not have to pay for them for 90 days or more. This gives your company time to either resell those goods for profit or convert those materials into finished products that can then be sold. Thus, as your business gets paid from its customers, you then can repay your supplier from that revenue.
Even if you already have established a trade credit line with your suppliers, you can always ask for better terms.
Or,
Some vendors are financing purchases. Some larger vendors are offering to lend your business cash as long as you use those funds to purchase its products.
How this works: Lets say a large software or hardware company sells its products through a national distribution channel of resellers, vendors and retail outlets.
The large company lends your business the capital it needs to purchase these products through this distribution channel.
This helps your business get the products it needs to grow and prosper as well as helps its needed distribution channel stay in place.
2) Leverage Your Customers:
You worked hard to win the customers you have and you want to continue to work hard to keep them. But, many growing or struggling companies can find themselves a bit short of working capital from time to time especially if the firm is having a growth spurt.
There are three options for financing:
a) Accounts Receivable Factoring.
If your business has invoices that have yet to be paid but your company needs cash now to complete or bid on other jobs, then factor those receivables for working capital now. While this might cost a bit in interest and fees, it is much less than losing out on new business or missing a customers deadline.
b) Purchase Order Financing.
If your business has job orders in hand but is lacking the capital to fulfill them, factor those purchase orders. Most of the time, your company can receive up to 100% of the cost of those orders including labor costs.
Much better to fulfill the order then to lose that customer(s) and their future business; not to mention not soiling your companys reputation in the industry.
c) Business / Merchant Cash Advance.
If your business accepts credit cards as payment, it can also factor its future credit card sales for working capital. These cash advances are designed to work with your business as it moves forward. Thus, repayment is set on future sales and not fixed monthly payments all designed to allow your company the ability to grow.
All three of these methods of alternative financing are based on your business and its ability to attract, win and satisfy paying customers not based on your personal credit score.
Further, these alternative lenders are in the business to lend money it is how they make money. Thus, these companies want to work with you and can customize their products to ensure they create that covenanted win/win for both parties.
3) Leverage Your Character:
With social media taking over the world, your business can also tap this phenomenon to raise needed funding.
Look into these additional alternative business financing options using your social skills:
Peer-to-Peer Lending or Social Lending.
Crowd Funding.
Friends and Family Loans.
Owner Financing.
Local Investor.
Just to name a few.
While banks and other private lenders might not be lending to small, growing business, it is time to show them that if we dont matter to them, then they dont have to matter to us as we still can tap these alternative capital sources.
Some of these alternative options may be a little more expensive, overall, then having a single credit facility with a bank. But, they are also a sure fire way of leading your company through our current credit drought. The key to success is to do your homework. Find the program that best fits your needs and that will provide the greatest benefit at the lowest cost to your business.
Some business owners tend to panic a bit when they begin to feel the credit pinch. It is only natural as raising money for your business is time consuming; time that can hardly be spared in these trying times. But, remember to think about the long term.
What you do today could dictate the long-term future viability of your company. Thus, if you need capital now and your bank is saying no then by all means look into these alterative financing resources. You just never know how well they might help you reach your immediate goals.
