Setting up a business is always a hard first step. Aside from setting up the place and getting the people to work with, the most challenging hurdle is getting appropriate funding.
Money is hard to come, and many banks would turn down quick starters simply because there’s no traction or proof of your capacity to pay.
There are a lot of options to solve that problem. Alternative loans and startup financial opportunities are available for your business needs.
Alternative Financing/Lending
Alternative lending refers to a group of non-traditional lending corporations that stem outside the usual processes of credit unions or bank organizations. Under alternative financing come various lending models, like virtual or online lending, marketplace, private lending, and crowdfunding or crowdsourcing.
Loan contracts from alternative financial institutions feature faster application processes and higher approval. So even if you have a low credit score, you are more likely to get approved in these institutions than banks. However, these lending companies have higher interest rates despite faster business transactions and flexible payment schemes.
Here are some alternative lending options to consider:
Marketplace Financing
Marketplace lenders use social media and other communication platforms to connect investors to people in business looking for loans and funding. This peer-to-peer interaction removes the involvement of a traditional bank and allows a more flexible and personal approach to investor-borrower relationships.
You can negotiate with investors and private lenders about how much funding you can get and how you would pay it back. But that depends on whether or not they like your business proposal.
Direct Private Lenders
While marketplace lenders negotiate on a common platform to connect borrowers and investors, direct private lenders are another option for flexible lending and financing. These corporations are not restricted by the usual regulations of other lending businesses.
Direct private lenders are the best option for small business owners because they can offer installment loans for bad credit owners with a high approval rate.
Online Lending Platforms
Online lending is a fresh concept of alternative loans. The main feature of online lending platforms is to provide borrowers with a high approval rate and instant fund transfer at the comfort of their homes.
For the most part, they don’t check credit standings and often approve instantly under a very tight limit. Most online lenders have slightly higher interest rates and an auto-ban feature when someone incurs too many penalties.
Once you’ve paid up your first loan, more opportunities will arise. The more you pay up your dues, the more your loan limit will increase, plus bonuses.
Crowdfunding or Crowdsourcing
If you feel that your business is compelling and innovative, why not tell the public and see what they think of it? Crowdfunding is a new concept where you pitch your business on a platform, and people pledge donations or funding until you meet your end goal.
Crowdfunding is popular in small businesses or those in the early stages of testing and startups. It eliminates any application process and removes regulations or rejections from lending institutions. The only catch is it depends on how marketable your business offer is and if it catches people’s interests.
Collateral Loans
Collateral loans are common financing routes most people in business take for funding. However, collateral loans are not exactly pure conventional. While they are available in most banks, many exist in companies that buy, sell, and negotiate with material assets.
The good thing about collateral loans is that they offer clients a flexible payment scheme and reasonable interest rates, favoring most business owners. Additionally, your loan can be adjusted based on the market value of your collateral, so an asset with a high market value rate can produce a better loan offer if used as collateral.
Keep in mind that the most significant risk is losing your assets. If you fail to pay dues on time or incur too many penalties, the lender reserves the right to take your collateral to pay off the loan.
Final Thoughts
Financing a business is hard, especially if you’re starting in the industry and need more funding to cover the initial costs. Fortunately, there are many options to finance yourself outside of the brick-and-mortar banks for business loans.
Plan out your next loan or write up a convincing business plan. With this, you can get the proper funding you need in no time.
