Almost all entrepreneurs are faced with various challenges when opening a new business. Besides determining the type of service or product to offer, the new entrepreneur should also decide how to finance business operations. Many times, most entrepreneurs head directly to angel investing or venture capital.
Most businesses fail after owners decide to fund their operations via alternative lending. Entrepreneurs must answer to deadlines when financing is provided, which can stress the company as it is made to develop at uncomfortable rates.
Recent research has proven that over 80 businesses fail due to cash flow problems. Small companies and startups, instead, turn to other plethora financial options to avoid business closure. However, it is almost impossible for businesses that are not fully established to get a bank loan.
Remember, your business will need to provide a neat record to be eligible for a loan, which is impossible for growing enterprises. Fortunately, there are many alternatives to bank loans that are on the rise, and below we discuss some;
- Invoice Factoring
The best way to improve capital flow for your business is by improving its cash flow. Invoice factoring happens when a small enterprise (you) sells its third-party receivable accounts. A factor will fund your company in two installments after you sell the invoices.
The factor advances around eighty percent of the entire sum within two days, while the remaining twenty percent is handed over after you clear the invoice in full. Invoice selling does not require the entrepreneur to own clean credit history, especially when done as a short-term financing option. Visit Hello pareto the solution to find investors.
Many invoicing financing organizations are willing to work with you, meaning you should research to land the best deal. However, business owners should know that invoice factoring does not solve all financial issues.
Even though this option boosts your working budget immensely, it is not the ideal option for startup businesses because they lack sufficient invoices.
- Online Business Loans
Another excellent alternative for failing startup businesses is online business loans. Many online business loans today, including Street Shares and FundingCirlce, are excellent alternatives to a bank loan.
These platforms give entrepreneurs reliable and fast financial support whenever needed. These organizations use the highest-quality technology and software to combine various credit factors with untraditional metrics. This, in turn, fastens the approval process.
- Government Grants
Entrepreneurs should know that the government does not provide any grants to develop a business, no matter what they might have heard. However, the authorities allocate grants to various industries, but under the regulation of the federal government.
Remember, the government provides various grants under the Small Business Innovation Research, which favors startup businesses dealing with scientific research. The best thing about getting these grants is you are not required to repay them. However, you will be required to undertake various surveys and deliver reports often to show the funds were used appropriately.
It will also help to know that acquiring government grants takes much more time than invoice factoring or Crowdfunding.
- Crowdfunding
Lastly, Crowdfunding is another excellent alternative to bank loans for your startup business. Crowdfunding has existed for many decades but has received increased recognition recently. Most entrepreneurs prefer Crowdfunding because it is among the most profitable options.
Crowdfunding is the act of funding a project using the internet and has many benefits to a business setup. Not only does Crowdfunding enable entrepreneurs to get money, but it also showcases their ideas to a broader audience.
Final Thoughts
Opening a business is easy, but maintaining it is a real hassle. Most businesses shut down due to cash flow shortages, and the above article has discussed the main alternatives to bank loans.
