New businesses seeking startup capital, and even existing business wanting to expand, are encouraged to find traditional financing from banks, credit unions, and similar lenders.
While this classic method may work for some, it doesn’t work for everyone. Banks and other lenders are also becoming more selective in who they provide funds toward.
The positive is that there are more alternative lending options out there, many of which are offering decent terms and conditions. These also allow someone to continue pursuing their dreams of entrepreneurship rather than giving up the first time their idea was rejected.
In some cases, there will be different restrictions that may be unexpected if you’re used to traditional lending. For instance, a private lender can offer a long-term loan but it might have higher interest rates or a shorter term, or pre-payment penalties.
Some options for alternative lending include:
- Private loans. Individuals or even businesses offer to fund certain projects. Each organization may have its own sets of rules and restrictions for how to qualify or the repayment process.
- Line of credit. Rather than an applicant going to the same source over and over for additional lending, a lender may offer a certain amount of funds that the applicant can draw from any time. This can be handy for situations like payment.
- Invoice financing. This process provides funds to people based on the percentage of the value of any outstanding invoices, which can be used as collateral. This could be an easy option for a business that doesn’t want to be part of the full invoicing process.
- Merchant cash advances. The future is unknown but it could help put together this type of financing. Basically, in return for a source of funding, the applicant pledges to provide a portion of the revenue earned in the future. Sometimes this option could be useful for a business with a steady amount of traffic.
- Equity crowdfunding. Several individuals or groups of businesses can combine financial resources. Each investor receives a certain share based on the size of their donation.
For more financial strategies visit Monstera Lending Group.