Bank financing might not suit many startups and new businesses because of the cumbersome lending and strict qualifying criteria. Startups are keen to look for alternative methods of funding by bypassing banks and other financial institutions.
Eric Dalius, a successful entrepreneur renowned for his marketing skills, has enough experience with such non-traditional forms of financing, about which you will learn more from this article. Creating a business plan and arranging for finances go hand-in-hand as these are the crucial elements for starting up a business.
However, arranging for finances for business startups can be a challenging task, especially for those with poor credit. For traditional lending, it requires some acceptable credit score range to secure a loan. Here are some options for business financing without approaching a bank or financial institution.
Non-Traditional Finance
Community Development Finance Institutions
Known as CDFIs, thousands of such institutions spread across the country are not-for-profit organizations that provide capital to micro and small business owners on reasonable terms. These organizations have the mission of financing small businesses, most of which struggle to arrange for finances from traditional sources.
Although CDFI lenders consider the credit score a qualifying factor for borrowers, it considers the circumstances that might have compelled borrowers to take a temporary hit on their credit score while meeting unforeseen medical expenses and other emergencies. According to Eric J Dalius, CDFI lenders take a more considerate approach to fulfill their mission of financing small businesses.
Partner Financing
This type of financing consists of finding a strategic partner from within the industry who is ready to put in money for your business in exchange for special access to your finished product, distribution rights, staff, and even the sale of products or a combination of a few selected parameters.
Partner financing gives the opportunity to partner with a bigger player in the industry, stimulating and expediting growth, feel EJ Dalius. You can have access to the resources like marketing and salespeople and customers of the larger company to propel your business in the fast track of growth.
Invoice Factoring
Also known as invoice financing, you can seek advance money from some willing service provider against your accounts receivables, which you pay back after the customer settles your bill. It is an excellent way to maintain a steady cash flow for your business instead of waiting for your customers to pay the outstanding invoices.
This financing method allows business owners to close the pay gap between billed work and payments, and companies can take advantage of business opportunities that come their way by depending on the steady cash flow.
Crowdfunding
Several crowdfunding platforms like Indiegogo and Kickstarter are prevalent among small businesses and they can use them to meet their funding needs. The platforms provide extended reach for companies that can approach several small investors willing to out in their money for the business venture or some specified project.
Crowdfunding allows raising the necessary seed funds that help startups to take off from the ground.
