Banks don’t like to take a chance on and approve a traditional loan for a smaller or less-established merchant. There is simply too much risk. Startups and small businesses don’t have collateral, haven’t established enough good credit, and there are too many chances that they could go bankrupt.
Though it’s not likely to happen with bank, alternative lenders are willing to help you fund the growth of your company with business funding. Whether it’s through merchant cash advances or retirement accounts, business funding is possible if you open up your mind and consider all of the options.
4 Business Funding Options for Small Businesses
When traditional bank loans aren’t an option, consider these ways to fund your ventures:
1. Tap into Your Retirement Account
Borrowing money from your IRA or 401(k) can seem like quick and easy cash at your disposable. However, instead of cleaning it out, consider a 60-day, interest-free loan from one of these accounts. You can avoid fees if you repay the loan before the terms end.
2. Apply for a Government Grant
Getting a government grant requires you research the opportunities at local, state, and federal levels. Keep in mind that there is only a finite amount of money available and there is a lot of competition for these dollars. Additionally, since they are government-based, the dollars come with a lot of strings attached. For example, there may be reporting requirements, audits, and others terms that your business must adhere to for the funding.
3. Trade Products or Services for Funding
Bartering or swapping products or services for funds to pay for something else, additional inventory, new equipment, or developing a new product, is definitely a viable option. Not only do you get the money you need, but it is a good opportunity to get rid of unnecessary inventory or try out a new product or service. Just keep in mind that bartering doesn’t allow you to pay for rent or hire new staff members.
4. Consider a Merchant Cash Advance
Business funding, such as a merchant cash advance, is especially attractive to startups and small businesses because when sales are slow, the amount that is deducted for repayment is proportionately lower. Repayments are based future credit sales instead of a regularly monthly payment. Also, you can do whatever you want with your business funding. Alternative lenders offer unrestricted use of funds while traditional loans have many restrictions.
A merchant cash advance is perfect for you if you have a high volume of monthly credit card transactions and you can provide proof of credit card processing for a few months. The beauty is you need no collateral and you don’t have to have a credit score to get qualified.
Business Funding is Attractive to Alternative Lenders
Third-party lenders offer business funding options because they make good investments. In addition to getting back what they are owed, lenders continue to take their percentages until the funds are paid back in full.
A Few Last Things to Think About
Flawed business plans, poor leadership, or a lack of money to make necessary changes to improve or fix a business are challenges that every startup faces.
When banks prevent you from having the opportunity to react to market changes, customers’ needs, or maximize your growth, you need to look for other funding opportunities. Don’t allow banking regulations, strict credit requirements, an extensive review of tax forms and bank statements, and complicated contracts stand in the way of getting you the business funding you need.
If you can’t get a traditional business loan, apply for business funding via an alternative lender, such as First Merchant Account (FAM). It specializes in providing merchants with financing options that work for every business. The online application process is simple and easy.