Obtaining financing for a new business venture is vital if you hope to get it off the ground. But, once the doors are opened, the need continues. Traditional sources of financing are often not available to small business owners, especially for startups and tradies. The good news is that there has been an emergence of alternative sources of funding, which just means more business financing options all the way around.
The following are some of the top sources of alternative financing:
This method of financing is widely used by small businesses to maintain a healthy cash flow while they wait for customers who owe them money to pay their invoices.
The two different forms of invoice financing are:
- Invoice Finance: using one or more of your unpaid invoices to secure a loan. Some lenders offering this service will lend up to 100% of the amount owed on the invoices, in return for a small fee and weekly interest payments. Invoice financing is often used by small service providers like tradies and agencies, which routinely come up against cash flow problems after buying materials to finish a project and then being forced to wait before getting paid for the job.
- Invoice Factoring: a third party buys your invoices at a discount in exchange for paying you immediately.
Australian small business owners and other entrepreneurs are flocking to online lenders when they need an influx of cash to manage expenses and help their businesses grow. One of these lenders is Unsecured Capital, known to approve small business loans in just minutes once the application process online is completed. The funds are often transferred into the borrower’s bank account the very same day. What makes online loans so appealing is that the lenders require no security; therefore, there is no need to use your home as collateral.
Loans for more money are also available, although they usually require more documentation and paperwork. They may also ask for some type of security, so you would need to use your home or another valuable asset as collateral. Even so, online loans are still a lot easier and quicker to get than going through the process of obtaining a conventional business loan.
Just being able to borrow a substantial amount of money so quickly, often within 24 hours, is what makes online loans so appealing to small business owners in Australia.
Startups across the world are persuading complete strangers to pool their money in an effort to help them get their project or business off the ground. They doing this through the Internet by posting their pleas on sites like Kickstarter, Indiegogo and GoFundMe. To be successful, you would need an innovative and compelling business model or project so that people would be willing to open up their wallets. They usually expect something in return for their investment, perhaps an opportunity to be involved in development, a percentage of gross revenue or maybe your end product for free.
There are a couple of disadvantages to raising money through crowdfunding however:
- You won’t have a mentor to advise you like you would have with an angel investor or venture capitalist (see below).
- On many of these platforms you must reach your funding goal or you get nothing.
Angel Investor or Venture Capital
In some cases a business needs a large influx of cash and often could use some good management advice in order to grow the business. If this sounds like your situation you would be well served by getting your funding from an angel investor or someone who provides venture capital. Using this method, you would be giving up some equity and a lot of control. In return, you would get the kind of guidance and support you need from your investors who are intent on helping you to substantially grow and expand your business.
Are you looking for some extra funds for your business? The team at Unsecured Capital can help, learn more about our Unsecured Business Loan products here.