All businesses struggle from time to time, and while some can seem to snap out of it quickly, others are scrambling for funds. There are many ways to obtain extra funding, commonly known as “alternative business funding”, and while not all are quick methods, they can help you get your business out of a hole. Some of these are true “loan” types, and have to be paid back, while others are “grant” types and do not. The choice is up to you, as all methods do not work for every business. Below are some of the best – and time tested – methods of alternative lending.
Merchant Cash Advance: This is the best way for most merchants (with merchant accounts) to obtain extra funds – and fast. With a merchant account provider like FAM, the turnaround time is as quick as 72 hours. This method is not a loan, but rather a “buy in” to your future sales, and that is how repayments are made: A small percentage of your credit card sales are reserved via merchant account to repay the amount you borrowed. This method is also great for those with credit issues, because since this isn’t a loan, a FICO score under 500 is accepted and there is not any year-end tax paperwork to file.
Deferred Credit Card Payments: This should be a last resort, as it can add to an even higher interest rate in the end. Some rely on a deferred credit card payment to save money when they are in a jam – or if they simply cannot afford to pay back their monthly amount.
Crowdfunding: It’s not reliable, but many fall for the social media-driven hype of crowdfunding. You set an amount that you need to raise, and you may or may not make the amount in donations. Remember, before setting your mind on a desired amount to read the fine print, because all of these hosting sites take a percentage of money taken in, ranging from 10%-30%.
Microloans: Yes, they are loan, but they are specifically designed to work for small businesses and high risk businesses. Sites like Accion offer small loans in various business categories, with specialists who know the ins and outs of these businesses. This is great if you have your mind set on a loan – or need to raise your credit score.