Creative business financing: Alternative routes to growth

Often, funding your business isn’t cut-and-dried – in fact, it’s likely you’ll need to research creative business financing. Today, just 1 in 4 American small businesses qualify for a bank loan. For many small business owners, this leaves them at a loss as to how to expand their business. However, traditional lenders are far from the only way to fund your venture. Now, many entrepreneurs are exploring alternative financing – and the limit is only how creative you’re willing to get. In this article, we suggest a few routes to creative business financing, so you can grow your company.

5 creative business financing solutions

1. Revenue-based business funding

There are several reasons why small businesses might get turned down for a bank loan. It may be because of how long the business has been open, the owner’s personal credit file, or because the company doesn’t have the assets to collateralize the loan. This can be frustrating, especially for businesses that have a strong revenue performance. However, there are alternative lending programs that give high performing small businesses access to funds. These revenue-based business funding programs focus on a company’s income over their credit file, enabling them to qualify for financing with greater ease.

2. Business credit cards

Many small business owners overlook credit cards when they’re trying to come up with ideas for creative business financing. However, with the right pick, a business credit card can be one of the most economical and straightforward business funding solutions. A business credit card works exactly like a personal card, but they’re intended for business purchases. Often, they’ll have higher limits and perks related to business. Although you’ll need a good credit file to qualify for the best offers, there are options for companies that need to build credit. However, business credit cards are only suitable if you need a quick cash boost. For more significant amounts of money, it might be better to look into alternative lending programs.

3. Grants for small businesses

If you’re prepared to put in the time to complete the applications, grants are some of the most lucrative business growth solutions. This is for one simple reason – you don’t have to repay the money. However, these programs are extremely competitive. Therefore, you need to carefully research and prepare your application, ensuring you meet the eligibility criteria. From here, you need to make sure you write an application that really makes your business stand out. You can find out more about some small business grant opportunities here.
 

 

4. Friends and family

If you’re lucky enough to have family or friends who can afford to invest in your company, it’s a great option. Due to your close relationships, your friends or relatives are more likely to give you a good deal on an investment than a bank or venture capitalist. Although there are emotions at stake, usually, inviting friends and family to hold in a stake in your business is creative business financing at work.

Although you may trust your friends and relatives, it’s still important to draw up a formal agreement. That way, you make sure everyone’s interests are protected. Write out the loan terms in full, including the time period and repayment increments. If your friend or family member is making an equity investment in the company, ensure you are clear about the percentage of ownership they are taking on. This is important, as it will determine the percentage of profits they take or the amount of influence they have.

5. Crowdfunding campaigns

In the age of social media, crowdfunding has really taken off as a source of alternative business funding. With platforms like Kickstarter or Indiegogo businesses can gather contributions from the public working towards a grand total. You have to share content describing your vision for the funds, your goals, and then use your social media channels to solicit donations. However, most crowdfunding platforms work on an “all or nothing” principle, so you have to reach your funding goal to get any cash at all. Therefore, your idea needs to be compelling. Often, a good strategy is to incentivize donations with special offers. The most effective schemes are tiered, where the more you donate, the better your reward.

Choosing the right solution for your business

Your route to creative business financing will depend entirely on your company’s individual needs. For instance, if you need money for everyday purchases, a credit card is perhaps the best option. Equally, if you need a large sum, perhaps looking into alternative lending programs is right for you. Either way, be sure to do your research so you can be confident the funding source you choose suits your business needs. There are numerous routes to creative business financing – and with a bit of ingenuity and hard work, you can help your business grow.