There are many approaches to financing a small business. You can raise funds for your business through loans, grants, and investors. These methods are classified as conventional and you must have the needed qualifications to get such financial assistance.
However, your small businesses may not be eligible for such kinds of funding. If you don’t qualify for these conventional methods, you can still finance your business through unconventional methods.
Below are some of the unconventional methods to finance your small business:
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1. Low Doc Loans
These loans are specifically given to small business owners who have little or no documents to prove their income. Conventional lenders usually ask for documents like tax returns, bank statements, credit history, renting history, proof of income, gift letters, government-issued ID, and rent or mortgage statements. But for low doc loans, lenders can process loans without most of these documents. You’re only required to declare your income and present a statement to show that your business is active.
Take note that the maximum amount of cash you can borrow may not be as much as what banks offer. But operating a small business requires little capital, thus low doc loans would suffice. Additionally, these loans have low-interest rates. If you’re interested, look for a reliable provider in your area of residence and make further inquiries.
You can get startup capital from enrolling in competitions–participate in competitions where you pitch your products. Every win comes with a reward, and, in most cases, business competition rewards are monetary in nature, rather than physical goods. You can use the cash you’ve won to fund your business expenses.
Remember to check the terms and conditions before joining such competitions. One common regulation is being a registered member of the host group to participate.
In addition to monetary rewards, such competitions give your brand visibility in front of investors who might be interested in partnering with you. If you get a reliable business partner, they can help you raise more funds for your business.
3. Peer-To-Peer Lending
Your peers are people who can fit in your shoes and understand most of your troubles. You can approach them for donations to help boost your business capital. They can, in turn, contact their other friends who may be interested in supporting your venture.
This method of financing makes it easy to get capital and also enables small businesses to grow into corporations. To succeed, you need to master the art of mobilization. If you approach it haphazardly, the whole exercise may be futile. Fortunately, you can find websites nowadays that facilitate this kind of borrowing. Be sure you can trust the site before using it for fund-raising.
Crowdfunding allows you to develop your story by engaging with potential supporters of your business ideas. Your unique business ideas motivate the public to support you. This way, you get cash from both friends and people you don’t know from across the world. Also, you don’t have to return their money nor include them in the ownership of your business.
Similar to peer-to-peer lending, you need to study the science and art of mobilization to ensure your proposal convinces the masses to support you. You may want to use crowdfunding sites that allow you to create a profile, tell your story, and ask for donations.
Bootstrapping means starting your business with minimal financial resources. Perhaps all you have is your little savings, without any assets, like land and equipment. Nevertheless, you can use the little you have to kickstart your business.
Of course, this approach can lead you into financial strain. But as you get along, friends and family can help you raise more funds through donations. What you need to do is maintain very strict control of expenses to avoid going bankrupt.
This method of financing is appropriate for businesses with quick turnover. Think about those businesses where you stock your store today and sell almost all of it by the next day. Such a quick flow of goods enables you to grow your business capital with every passing day.
To Sum It Up
All businesses need capital to excel. With the current red-tapes of mainstream lenders, you may want to consider financing your business through unconventional means. You already have the five options suggested above. Explore them and witness your business grow.
Whichever financing alternative you pursue, take your time to study its ins and outs. Learn what works and what doesn’t. Remember, it’s not always easy to convince any individual or organization to give you money. Your business idea has to be very promising and you need to borrow in a manner that doesn’t turn off potential lenders.